Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_15-cv-00972/USCOURTS-azd-2_15-cv-00972-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1441 Petition for Removal - Employment Discrimination

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Paula C. Lorona, 

Plaintiff, 

v. 

Arizona Summit Law School, LLC; Infilaw 

Corporation; Jane and Johns Doe 1–100; 

Black Corporation 1–100; White 

Partnership 1–100, 

Defendants. 

No. CV-15-00972-PHX-NVW

ORDER 

Before the Court is Defendant Arizona Summit Law School, LLC’s Motion to 

Dismiss (Doc. 35) and the parties’ accompanying briefs. For the reasons that follow, the 

motion will be granted in part and denied in part. 

I. BACKGROUND 

On March 2, 2015, Paula Lorona filed a complaint pro se in state court against 

Arizona Summit Law School, LLC (“Arizona Summit Law School” or “the Law 

School”), Infilaw Corporation (“Infilaw”), and various individuals and entities. (Doc. 1-1 

at 1–18.) Lorona then amended her complaint to include federal statutory claims. (Doc. 

1-1 at 56–80.) 

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On May 28, 2015, the defendants removed to federal court. (Doc. 1.) Lorona then 

obtained counsel (Doc. 14) and amended her complaint again (Doc. 20). That second 

amended complaint named only Arizona Summit Law School, Infilaw, and fictitious 

entities as defendants. (Doc. 20 at 1.) It claimed violations of federal employment laws 

and state fraud laws. (Id. at 18–49.) The Court dismissed many of the employment 

claims and all the fraud claims for failure to state a claim upon which relief may be 

granted, but permitted Lorona to amend her complaint again. (Doc. 33 at 27–28.) 

On January 14, 2016, Lorona filed a third amended complaint. (Doc. 34.) The 

revised complaint contains federal employment claims against all defendants and statelaw fraud and negligent misrepresentation claims against Arizona Summit Law School 

only. (Id. at 14–28.) The Law School moves to dismiss the fraud and negligent 

misrepresentation claims. (Doc. 35.) Oral argument was held on May 13, 2016. 

The relevant allegations in the third amended complaint are summarized below. 

They are presumed true at this stage. 

A. Arizona Summit Law School’s Representations to Lorona 

In considering whether and where to attend law school, Lorona reviewed Arizona 

Summit Law School’s “Viewbook,” a marketing brochure about the Law School. (Doc. 

34 at ¶¶ 37–38.) She read a paper copy of the Viewbook on campus, as well as an online 

copy on the Law School’s website. (Id.) The Viewbook contained enrollment statistics 

about the Law School’s students, including their median Law School Admission Test 

(“LSAT”) scores and undergraduate grade point averages (“GPAs”). (Id. at ¶¶ 38, 49.) 

LSAT scores and undergraduate GPAs are commonly accepted indicators of a student’s 

likelihood to succeed in law school and pass the bar exam. (Id. at ¶ 48.) As of spring 

2008, the Viewbook reported a median LSAT score of 153 and median undergraduate 

GPA of 3.18. (Id. at ¶ 49.) The Law School also reported this information to a third 

party, the Law School Admission Council, which posted the information on its website. 

(Id. at ¶ 38.) 

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Lorona also reviewed other statements by the Law School about its program. She 

read on the Law School’s website that more than 80% of its graduates passed the bar 

exam. (Id. at ¶ 41.) She read in the Law School’s application packet that only two out of 

70 graduates who were actively seeking employment were unemployed and that 

graduates had a median salary of $60,000 and a median student loan debt of $101,310. 

(Id. at ¶ 39.) She read in the Law School’s application instructions that the Law School is 

governed by an American Bar Association standard prohibiting the admission of 

applicants “who do not appear capable of satisfactorily completing its educational 

program and being admitted to the bar.” (Id. at ¶ 40.) 

Based on this information, Lorona decided the Law School would be a good 

school to attend. (Id. at ¶¶ 42, 89.) In August 2009, she applied for traditional 

enrollment and was accepted as a traditional evening student. (Id. at ¶ 44.) 

As a student, Lorona kept track of the Law School’s enrollment statistics, which 

the Law School updated each year. (Id. at ¶¶ 45–47.) In particular, she noted that the 

Law School’s median LSAT scores and undergraduate GPAs remained stable while she 

was a student and compared favorably to other law schools. (Id. at ¶ 48.) Through 2014, 

the Law School continued to report an “Ultimate” bar pass rate of over 80%. (Id. at 

¶¶ 61–62.) This rate was based on the number of Law School graduates who passed the 

Arizona Bar Exam on the first or subsequent attempts. (Id. at ¶ 61.) The Law School 

also continued to report graduates’ employment status and average salaries. (Id. at ¶ 67.) 

From 2010 through 2013, the Law School’s website stated that the school “places 97% of 

its graduates into jobs within nine months of graduation.” (Id. at ¶ 68.) Based on this 

information, Lorona decided to remain at the Law School. (Id. at ¶¶ 48, 63, 69, 90.) 

At some unspecified time and place, the Law School described its legal education 

program as follows: 

We believe by graduation, lawyers should enter the workforce 

professionally prepared to practice law in a variety of diverse 

settings and industries. Summit Law partners with local law 

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firms, courts, municipalities, businesses and non-profits to 

provide real-world work experiences that foster our students’ 

desire to learn, grow and succeed while creating wellrounded lawyers who add immediate value to their firms 

and employers.

(Id. at ¶ 93 (emphasis in original).) 

B. Shortcomings in Arizona Summit Law School’s Representations

Arizona Summit Law School’s enrollment statistics did not reflect the LSAT 

scores or undergraduate GPAs of all its students. In 2005, the Law School began 

admitting some students via an “Alternative” admissions program that did not require 

LSAT scores or undergraduate GPAs within the traditional range. (Id. at ¶¶ 50–51.) The 

Law School did not include these Alternative students’ LSAT scores or undergraduate 

GPAs in the enrollment statistics reported in its Viewbook, on its website, or to the Law 

School Admission Council. (Id. at ¶ 52.) The Law School did not specify that its 

statistics omitted Alternative students, and Lorona did not know of this omission. (Id. at 

¶¶ 54–55.) 

The Law School substantially increased its percentage of Alternative students 

from 2005 to spring 2011. (Id. at ¶ 53.) During the time Lorona was enrolled, most of 

the students at the Law School were Alternative students. (See id. at ¶¶ 53, 57.)1

 The 

Law School knew that students’ LSAT scores and undergraduate GPAs correlate with 

their likelihood of passing the bar exam. (Id. at ¶¶ 46, 70–71.) Thus, the Law School 

predicted that the more Alternative students it admitted, the fewer of its graduates would 

pass the bar exam. (Id. at ¶¶ 72–73.) The Law School did not disclose this prediction to 

its students. (Id.) 

 1

 The third amended complaint is not clear on exact figures. It alleges that 80% of 

those who applied to be Alternative students in spring 2011 were admitted, but then 

alleges that 80% of the overall student population were Alternative students. (Doc. 34 at 

¶¶ 53, 57.) At oral argument, the Law School disputed the latter allegation. In response, 

Lorona maintained that at least a majority of the students were Alternative students. 

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The prediction proved true. In recent years, the percentage of Law School 

graduates who pass any given administration of the Arizona Bar Exam has fallen, from 

72.9% of those who took the February 2013 exam, to 63.3% of those who took the July 

2013 exam, to 48.8% of those who took the February 2014 exam, to 49.5% of those who 

took the July 2014 exam, to 52.6% of those who took the February 2015 exam, to 26.4% 

of those who took the July 2015 exam. (Id. at ¶¶ 59–60.) 

In May 2014, the Law School began to pay graduates who it predicted would fail 

the bar exam not to take the exam. (Id. at ¶¶ 74–75.) The predictions were based on 

students’ LSAT scores, undergraduate GPAs, law school GPAs, and other factors. (Id. at 

¶ 71.) In February 2015, for example, the Law School offered students predicted to fail 

the exam $5,000 and other benefits to defer taking it. (Id. at ¶ 77.) Eliminating these 

students from the pool of examinees artificially skewed pass rates in the Law School’s 

favor. (Id. at ¶ 78.) These more favorable pass rates enabled the Law School to maintain 

its reputation, accreditation, and federal funding. (Id. at ¶¶ 78–80.) 

C. Lorona’s Inability to Find Employment 

Lorona graduated from the Law School in December 2014 and passed the Arizona 

Bar Exam in 2015. (See id. at ¶ 86; Doc. 33 at 4–5.)2

 She incurred over $200,000 in 

student loan debt. (Doc. 34 at ¶ 81.) Based on the Law School’s representations, she 

believed that upon graduating she would find gainful employment at a law firm or in the 

public sector with a salary sufficient to repay this debt. (Id. at ¶ 82.) 

This belief turned out to be overly optimistic. While awaiting bar exam results, 

Lorona applied for positions that did not require a law license, such as bailiff, clerk, and 

paralegal. (Id. at ¶ 85.) She did not receive an interview. (Id.) After being admitted to 

the bar, she applied for positions at private law firms and in the public sector, and she 

enlisted the services of employment placement firms. (Id. at ¶ 86.) She received one 

 2

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exam, but she clarified these dates at oral argument. 

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interview but no callback. (Id.) She is currently attempting to establish a solo practice, 

without the support or client base she would expect at a private firm or in the public 

sector. (Id. at ¶ 88.) 

Lorona attributes her plight to the Law School’s reputation, which has recently 

plummeted due to its graduates’ low bar pass rates. (Id. at ¶ 87.) Had she known the true 

value of her law degree, she would not have enrolled in the Law School or would have 

withdrawn from the Law School and, if necessary, pursued a different career. (Id. at 

¶¶ 89–90.) She accuses the Law School of common-law fraud, statutory consumer fraud, 

and negligent misrepresentation (collectively, “fraud claims”). (Id. at ¶¶ 91–116.) 

II. LEGAL STANDARD 

Arizona Summit Law School moves to dismiss Lorona’s fraud claims for failure to 

state a claim under Federal Rule of Civil Procedure 12(b)(6). (Doc. 35 at 1.) 

When considering a motion to dismiss, a court evaluates the legal sufficiency of 

the plaintiff’s pleadings. Dismissal under Rule 12(b)(6) can be based on “the lack of a 

cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable 

legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To 

avoid dismissal, a complaint need include “only enough facts to state a claim for relief 

that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

On a motion to dismiss under Rule 12(b)(6), all allegations of material fact are 

assumed to be true and construed in the light most favorable to the non-moving party. 

Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, the principle that a 

court accepts as true all of the allegations in a complaint does not apply to legal 

conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 

(2009). Further, “[t]hreadbare recitals of the elements of a cause of action, supported by 

mere conclusory statements, do not suffice.” Id. “A claim has facial plausibility when 

the plaintiff pleads factual content that allows the court to draw the reasonable inference 

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that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is 

not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 

defendant has acted unlawfully.” Id. To show that the plaintiff is entitled to relief, the 

complaint must permit the court to infer more than the mere possibility of misconduct. 

Id. If the plaintiff’s pleadings fall short of this standard, dismissal is appropriate. 

III. ANALYSIS 

Lorona alleges fraud of three varieties: common-law fraud, fraud under the 

Arizona Consumer Fraud Act, and negligent misrepresentation. Each deserves brief 

explanation. 

A. Common-Law Fraud, the Arizona Consumer Fraud Act, and Negligent 

Misrepresentation 

To state a claim for fraud under Arizona common law, Lorona must allege (1) the 

Law School made a representation to her that was (2) false and (3) material, (4) the Law 

School knew the representation was false or was ignorant of its truth, (5) the Law School 

intended that she rely on the representation in the manner reasonably contemplated, (6) 

she did not know the representation was false, (7) she relied on the representation, (8) her 

reliance was reasonable, and (9) she was harmed as a result. See Echols v. Beauty Built 

Homes, Inc., 132 Ariz. 498, 500, 647 P.2d 629, 631 (1982); accord Revised Arizona Jury 

Instructions (Civil), Commercial Torts Instruction 24 (5th ed. 2013). Failing to disclose 

material information despite an obligation to do so is equivalent to a misrepresentation. 

Haisch v. Allstate Ins. Co., 197 Ariz. 606, 610 ¶ 14, 5 P.3d 940, 944 (Ct. App. 2000). 

The Arizona Consumer Fraud Act is “much broader in its scope” than commonlaw fraud. Cearley v. Wieser, 151 Ariz. 293, 295, 727 P.2d 346, 348 (Ct. App. 1986). 

The Act defines and prohibits consumer fraud as follows: 

The act, use, or employment by any person of any deception, 

deceptive act or practice, fraud, false pretense, false promise, 

misrepresentation, or concealment, suppression or omission 

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of any material fact with intent that others rely upon such 

concealment, suppression or omission, in connection with the 

sale or advertisement of any merchandise whether or not any 

person has in fact been misled, deceived, or damaged thereby, 

is declared to be an unlawful practice. 

A.R.S. § 44-1522(A). To state a claim for consumer fraud, Lorona must allege (1) the 

Law School made a false promise or misrepresentation (2) in connection with the sale or 

advertisement of merchandise, (3) she relied on the representation, and (4) she was 

harmed as a result. Kuehn v. Stanley, 208 Ariz. 124, 129 ¶ 16, 91 P.3d 346, 349 (Ct. 

App. 2004); accord Revised Arizona Jury Instructions (Civil), Commercial Torts 

Instruction 21 (5th ed. 2013). She need not allege that the Law School intended to 

deceive her. See State ex rel. Babbitt v. Goodyear Tire and Rubber Co., 128 Ariz. 483, 

486, 626 P.2d 1115, 1118 (Ct. App. 1981). Nor need she allege that her reliance was 

reasonable. See Kuehn, 208 Ariz. at 129 ¶ 16, 91 P.3d at 349. Although the Act is 

limited to the sale or advertisement of merchandise, the Act defines “merchandise” as 

including “intangibles” and “services.” A.R.S. § 44-1521(5). Arizona courts have 

applied this definition broadly. See State ex rel. Woods v. Sgrillo, 176 Ariz. 148, 148–49, 

859 P.2d 771, 771–72 (Ct. App. 1993) (information about credit cards is merchandise); 

Villegas v. Transamerica Fin. Servs., Inc., 147 Ariz. 100, 102, 708 P.2d 781, 783 (Ct. 

App. 1985) (money is merchandise); Flower World of Am., Inc. v. Wenzel, 122 Ariz. 319, 

321–22, 594 P.2d 1015, 1017–18 (Ct. App. 1978) (commercial franchise is merchandise). 

But see Waste Mfg. & Leasing Corp. v. Hambicki, 183 Ariz. 84, 87, 900 P.2d 1220, 1223 

(Ct. App. 1995) (existing business entity is not merchandise). 

Arizona also recognizes the tort of negligent misrepresentation as defined in the 

Second Restatement of Torts. St. Joseph’s Hosp. v. Reserve Life Ins., 154 Ariz. 307, 312, 

742 P.2d 808, 813 (1987). The Restatement provides, in relevant part: 

(1) One who, in the course of his business, profession or 

employment, or in any other transaction in which he has a 

pecuniary interest, supplies false information for the guidance 

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of others in their business transactions, is subject to liability 

for pecuniary loss caused to them by their justifiable reliance 

upon the information, if he fails to exercise reasonable care or 

competence in obtaining or communicating the information. 

(2) Except as stated in Subsection (3), the liability stated in 

Subsection (1) is limited to loss suffered 

(a) by the person or one of a limited group of persons 

for whose benefit and guidance he intends to supply 

the information or knows that the recipient intends to 

supply it; and 

(b) through reliance upon it in a transaction that he 

intends the information to influence or knows that the 

recipient so intends or in a substantially similar 

transaction. 

Restatement (Second) of Torts § 552 (1977). Accordingly, to state a claim for negligent 

misrepresentation, Lorona must allege (1) the Law School supplied “false information” to 

her (2) in a transaction in which it had a “pecuniary interest,” (3) the Law School 

intended that the information would “guid[e]” her in a business transaction, (4) the Law 

School failed to exercise “reasonable care or competence” in obtaining or communicating 

the information, (5) she “reli[ed]” on the information, (6) her reliance was “justifiable,” 

and (7) she suffered “pecuniary loss” as a result. Id.; accord Revised Arizona Jury 

Instructions (Civil), Commercial Torts Instruction 23 (5th ed. 2013). Negligent 

misrepresentation is “narrow in scope” because it is premised on the reasonable 

expectations of a foreseeable user of information supplied in connection with commercial 

transactions. St. Joseph’s Hosp., 154 Ariz. at 312–13, 742 P.2d at 813–14. Whereas 

fraud imposes a general duty of honesty, negligent misrepresentation imposes a specific 

duty of care. See Restatement (Second) of Torts § 552 cmt. a. Not every user of 

commercial information may hold every supplier to a duty of care. St. Joseph’s Hosp., 

154 Ariz. at 313, 742 P.2d at 814. The duty of care owed to the foreseeable user in 

supplying information for use in commercial transactions is a relative standard, “defined 

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only in terms of the use to which the information will be put, weighed against the 

magnitude and probability of loss that might attend that use if the information proves to 

be incorrect.” Id. (quoting Restatement (Second) of Torts § 552 cmt. a). The 

information supplier’s “pecuniary interest” in the transaction usually lies in payment, 

either in direct exchange for the information or as part of the transaction in which the 

information is supplied, but it may be of a more indirect character. Restatement (Second) 

of Torts § 552 cmt. d. 

For all three claims, Lorona must allege the circumstances constituting fraud “with 

particularity.” Fed. R. Civ. P. 9(b); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 

(9th Cir. 2003) (“It is established law, in this circuit and elsewhere, that Rule 9(b)’s 

particularity requirement applies to state-law causes of action.”); Gould v. M & I 

Marshall & Isley Bank, 860 F. Supp. 2d 985, 988 n.2 (D. Ariz. 2012) (applying Rule 9(b) 

to negligent misrepresentation); Grismore v. Capital One F.S.B., No. CV 05-2460-PHXSMM, 2007 WL 841513, at *6 (D. Ariz. Mar. 16, 2007) (applying Rule 9(b) to Arizona 

Consumer Fraud Act). In other words, Lorona must allege “the who, what, when, where, 

and how” of the misconduct charged. Vess, 317 F.3d at 1106. 

Some elements are common to all three claims. Other elements are unique to one 

or two of the claims. The Law School’s motion challenges only common elements. It 

does not, for example, challenge the Arizona Consumer Fraud Act claim or the negligent 

misrepresentation claim separately from the common-law fraud claim. This order 

addresses only the elements that the Law School challenges. Those challenges succeed in 

part and fail in part, as discussed herein.

B. Lorona Has Stated Fraud Claims Based on Reporting of Deceptively 

Incomplete Enrollment Statistics.

In short, Lorona alleges: Arizona Summit Law School knowingly and 

intentionally reported inflated enrollment statistics by omitting LSAT scores and 

undergraduate GPAs of students admitted through its less rigorous “Alternative” 

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admissions program. This omission was material because students’ LSAT scores and 

undergraduate GPAs correlate with their likelihood of passing the bar exam, which in 

turn determines a law school’s reputation and bears strongly on the value of its diploma. 

Unaware of this omission, Lorona relied on these inflated statistics in deciding to attend 

the Law School. As a result, she spent years and money on a degree that turned out to be 

worth substantially less than she expected. 

The Law School argues that Lorona’s allegations concerning misrepresentation of 

enrollment statistics fall short of fraud in several ways. None of the challenges is 

persuasive. 

1. Lorona has pled misrepresentation. 

According to the Law School, Lorona’s fraud allegations about its inflation of 

enrollment statistics are conclusory. On its view, Lorona merely assumes that (1) the 

omission of Alternative students improved the statistics regarding student LSAT scores 

and undergraduate GPAs, (2) these statistics generally affect the value of a law school’s 

diploma, and (3) there were enough Alternative students at the Law School that this 

omission had a material effect. But these allegations are reasonably specific and 

sufficiently plausible to stave off Rule 12(b) dismissal. However, the parties’ dispute 

over how many Alternative students were at the Law School seems easily resolvable and 

might prove dispositive. Thus, the Court will allow limited discovery on this issue and 

an opportunity for a summary judgment motion before allowing general discovery as to 

Lorona’s fraud claims. 

The Law School also points out that Lorona does not specify whether it violated 

any third-party reporting requirements. The Court previously viewed this lack of 

specificity as a reason to dismiss Lorona’s claim that the Law School reported misleading 

data to third parties. (See Doc. 33 at 22.) But her current complaint claims that the Law 

School reported misleading data not only to third parties but also in its marketing 

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materials to potential students. Thus, her claim no longer depends on third-party 

reporting requirements. 

The Law School also contends that Lorona fails to specify when it reported its 

enrollment statistics. Not true. She says the Law School reported these statistics in a 

marketing brochure and on its website, both of which she read when deciding whether to 

attend. She even gives an example: as of spring 2008, the Law School reported a median 

LSAT score of 153 and median undergraduate GPA of 3.18. She also specifies that the 

Law School updated these statistics each year and that she kept track of them as a 

student. These allegations are specific enough. The point of requiring specificity is “to 

give defendants notice of the particular misconduct” so that they can adequately defend 

against the charge. Vess, 317 F.3d at 1106. Lorona has provided enough detail to give 

the Law School notice of the misconduct she is referring to. 

2. Lorona has pled reliance. 

According to the Law School, Lorona fails to allege reliance on its enrollment 

statistics in enrolling in the school, because she does not specify when she decided to 

enroll or when she began her studies. But Lorona explicitly states that she reviewed 

those statistics before deciding to enroll. Indeed, she specifies what those statistics were 

as of spring 2008, which was before she applied and was accepted in August 2009. 

Although more detail is preferable, it is not necessary. 

The Law School also challenges the plausibility of Lorona’s claim that she relied 

on the enrollment statistics in remaining at the school—i.e., that she would have dropped 

out had she discovered the truth. But this claim is plausible. Lorona says she was 

incurring debt in the hope that her law degree would prove valuable enough to repay it. 

Had she known the Law School’s median LSAT scores and undergraduate GPAs were 

substantially lower than advertised, she might have predicted a decline in the Law 

School’s reputation and in the corresponding value of her degree, in which case she 

might have decided to cut her losses. Of course, discovery in this case might reveal 

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otherwise—for example, that Lorona knew the true enrollment statistics all along, or that 

she would have completed the program no matter the cost. But discovery might also 

reveal that many Arizona Summit Law School students did make the choice to drop out 

and incur no further debt. Accordingly, the Law School will have the opportunity to 

investigate and renew its objection at summary judgment. 

3. Lorona has pled damages. 

The Law School argues that even if Lorona relied on incomplete enrollment 

statistics, she was not damaged because she got what she paid for. Not only did she 

receive a legal education, but she attained a law degree, passed the Arizona Bar Exam, 

and is now attempting to establish a solo practice. On the Law School’s view, Lorona’s 

attendance at the Law School was beneficial, not damaging. 

This argument misunderstands the nature of Lorona’s damages claims. Lorona did 

not attend Arizona Summit Law School to start out as a solo practitioner without 

experience, clients, training, or income. She went to get a paying job with training in law 

practice. It turned out that she is unemployable, not even as a paralegal. According to 

her allegations, she reasonably expected a law degree from a school with enrollment 

statistics comparable to other schools (before and while she was a student), but she 

received a law degree from a school with enrollment statistics worse than other schools 

(during that same time). Thus, she received something less valuable than she paid for, 

much like a used car buyer who later discovers that the seller rolled back the odometer by 

20,000 miles. The damage does not stem from being worse off than before, but from the 

difference between the advertised product and the actual product. 

Admittedly, the fact and the amount of damage will be hard to prove and measure 

here. Lorona’s law school performance will matter, for example. As the Law School 

points out, damages may not be simply the difference between Lorona’s current income 

and what she would earn at another job, because even if the enrollment statistics had been 

accurate, there was no guarantee of post-graduation employment. But Lorona is not 

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suing on a guarantee. She is suing for fraud and related claims. Difficulty in calculating 

damages does not amount to failure to plead damages. 

C. Lorona Has Not Stated Fraud Claims Based on Other Alleged 

Misrepresentations. 

Lorona claims that the Law School made other misrepresentations beyond 

inflating its enrollment statistics. None of them gives rise to an independent fraud claim. 

1. The alleged representations of an “Ultimate” bar pass rate were 

not materially false or misleading. 

Lorona alleges that through 2014, the Law School reported an “Ultimate” bar pass 

rate of over 80% based on the total number of graduates who passed the Arizona Bar 

Exam on the first or subsequent attempts. This rate was higher than the percentage of 

graduates who passed any recent single administration of the exam. For example, only 

48.8% of the graduates who took the February 2014 exam passed, and only 49.5% of 

those who took the July 2014 exam passed. Moreover, the Law School had recently 

increased the percentage of students admitted through its Alternative admissions 

program, and it knew that such students were more likely to fail the exam. Therefore, 

Lorona claims the Ultimate bar pass rate was “extremely misleading at best.” (Doc. 34 at 

¶ 65.) 

Notably, Lorona does not claim in her third amended complaint that the Ultimate 

pass rate was false. This is because, as the Court explained in its previous order, the 

Ultimate pass rate measured something broader than the pass rate of any single exam. 

(See Doc. 33 at 21.) For example, a student might fail the exam four times but pass the 

fifth time, thereby lowering the pass rates for four exams but raising the Ultimate rate. 

(See id.) In addition, an overall decline in exam pass rates would affect pass rates of 

recent exams more sharply than the Ultimate rate. (See id.) 

Perhaps students might confuse the Ultimate pass rate with that of a single exam. 

But such confusion could not be attributed to the Law School. The Law School clarified 

that the Ultimate rate was based on graduates who passed the exam on “the first or 

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subsequent attempts.” (Doc. 34 at ¶ 61.) Indeed, the word “Ultimate” indicates its broad 

focus. Lorona does not claim that the Law School withheld pass rates of single exams. 

Quite the contrary, her complaint confirms that the Law School disclosed those rates as 

well as the Ultimate pass rate (see id. at ¶ 58) and that such rates are publicly available in 

any event (see id. at ¶ 66). 

Perhaps students might assume that the Ultimate pass rate would remain stable, 

whereas in reality, the Law School was admitting more and more Alternative students 

likely to lower the pass rate. But the fact that a statement might become false in the 

future does not render it fraudulent when made. “The general rule is that in order to 

constitute actionable fraud, the false representation must be of a matter or fact which 

exists in the present, or has existed in the past . . . .” Law v. Sidney, 47 Ariz. 1, 4, 53 P.2d 

64, 66 (1936). Lorona does not identify any exception requiring the Law School to warn 

students of a likely decline in its Ultimate pass rate. 

At oral argument, Lorona took the position (for the first time) that the true 

Ultimate pass rate was lower than what the Law School reported. To support this 

position, Lorona presented a chart calculating what the Ultimate pass rate, as defined by 

the Law School, should have been in recent years. Lorona’s counsel said he performed 

these calculations based on data taken from the Arizona Supreme Court website. Lorona 

did not submit a copy of this chart to the Court before or after oral argument. 

Ordinarily the Court would dismiss belated allegations like this one with leave to 

include them in an amended complaint. But amendment here would be futile. The chart 

presented by Lorona showed Ultimate pass rates averaging in the 80 percentages, 

consistent with the Law School’s representations. Admittedly, the chart showed a current 

Ultimate pass rate of only 75.4% in light of recent low pass rates. This variation, 

however, is too small and occurred too late to plausibly support Lorona’s claim that she 

detrimentally relied on the Law School’s contrary representation. 

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Because Lorona does not plausibly allege that the Law School’s reports of its 

Ultimate bar pass rate were materially false or misleading, she has not stated a fraud 

claim based on those representations. 

2. Lorona has not pled reliance or damages with respect to the 

alleged manipulation of bar exam results. 

Lorona alleges that in May 2014, the Law School began paying graduates who it 

predicted would fail the bar exam not to take the exam. The result, according to Lorona, 

was to skew bar exam results in the Law School’s favor. While this conduct is not an 

express misrepresentation, it may well be a manipulation of circumstances aimed at 

creating a false impression of the Law School’s quality. 

Whether or not such conduct is deceptive in general, it was not fraud against 

Lorona. She does not allege that she relied on the skewed exam results in deciding to 

attend or remain at the Law School. Nor could she plausibly so allege. She says the 

misconduct began in May 2014, but she graduated only seven months later, in December 

2014. She could not have known the results of any manipulated exam until her last 

semester. It is implausible that at that point, she would have relied on the results in 

deciding to remain at the school. 

Moreover, Lorona does not allege that the skewed results harmed her in any way. 

In fact, her complaint repeatedly suggests the opposite: that the results benefited her as a 

student and graduate of the Law School. She says the results “enabled” the Law School 

“to maintain its reputation as a competent law school” and “to retain accreditation and 

receive other benefits, such as eligibility for Title IV funding from the Department of 

Education.” (Doc. 34 at ¶¶ 78–79.) Thus, her own pleadings prevent an inference of 

harm. 

Perhaps the alleged manipulation of exam results will have evidentiary value in 

this case. But because Lorona does not plausibly allege that she relied on, or was harmed 

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by, the skewed exam results, she has not stated a separate fraud claim based on this 

conduct. 

3. The other alleged representations or omissions were not 

materially false or misleading. 

Lorona alleges that when she was deciding whether to attend the Law School, she 

read in the school’s application instructions that the school is governed by an American 

Bar Association (“ABA”) standard prohibiting the admission of applicants “who do not 

appear capable of . . . being admitted to the bar.” (Doc. 34 at ¶ 40.) The standard is not 

demanding; it applies only to applicants who appear incapable of becoming attorneys. 

Arguably the standard is so lax that it cannot give rise to a fraud claim at all. Even 

assuming a violation could be fraud, that is not this case. Lorona claims the Law School 

admitted students with substandard LSAT scores and undergraduate GPAs. But she does 

not specify these scores or GPAs or explain why such students would be incapable of bar 

admission. Lorona also claims the Law School predicted many of its students would fail 

the bar exam (on their first attempt). But she does not allege that these predictions were 

occurring at the relevant time—i.e., when she relied on the ABA standard in deciding 

whether to attend. Moreover, these predictions did not violate the ABA standard. The 

predictions were based in part on students’ law school performances, which the Law 

School could not have known when admitting students. And the students predicted to fail 

were not incapable of passing. Case in point: Lorona passed despite the Law School’s 

prediction otherwise. (See Doc. 20 at ¶ 119.) Thus, Lorona does not plausibly allege that 

the Law School violated the ABA standard at the time she claims to have relied. 

Lorona also alleges that when she was deciding whether to attend the Law School, 

she read in the school’s application packet that its graduates had a low unemployment 

rate, a median salary of $60,000, and a median student loan debt of $101,310. As a 

student, she read similar statements from the Law School about its graduates’ 

employment status and average salaries. But she does not plausibly allege that this 

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information was false or misleading. The mere fact that she ended up with a belowmedian salary and above-median student loan debt does not contradict the Law School’s 

prior, generalized statements about its graduates. 

Lorona also alleges that the Law School failed to disclose its prediction that fewer 

of its graduates would pass the bar exam as more Alternative students were admitted. 

But this non-disclosure was not fraud. As stated above, fraud is generally limited to “a 

matter or fact which exists in the present, or has existed in the past.” Law, 47 Ariz. at 4, 

53 P.2d at 66. Lorona does not explain why, contrary to general fraud principles, the 

Law School had an affirmative duty to state its beliefs about the future. Moreover, 

Lorona does not claim that these predictions occurred before May 2014. At that time she 

was already well into her last year. She does not plausibly allege that she would have 

acted differently had she learned about the Law School’s predictions. 

Finally, Lorona alleges that at some unspecified time and place, the Law School 

made the following representation about its legal education program: 

We believe by graduation, lawyers should enter the workforce 

professionally prepared to practice law in a variety of diverse 

settings and industries. Summit Law partners with local law 

firms, courts, municipalities, businesses and non-profits to 

provide real-world work experiences that foster our students’ 

desire to learn, grow and succeed while creating wellrounded lawyers who add immediate value to their firms 

and employers. 

(Id. at ¶ 93 (emphasis in original).) As the Court explained in its prior order, this 

freestanding statement does not give rise to a fraud claim because it is aspirational, not 

factual, and because the circumstances surrounding the statement have not been pleaded 

with particularity. (See Doc. 33 at 23–24.) 

D. Leave to Amend 

Leave to amend should be freely given “when justice so requires.” Fed. R. Civ. P. 

15(a)(2). Courts should consider five factors: bad faith, undue delay, prejudice to the 

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opposing party, futility of amendment, and whether the plaintiff has previously amended 

the complaint. Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). “Futility alone 

can justify the denial of a motion to amend.” Id.

Lorona has already amended her complaint three times. The most recent 

amendment followed a lengthy Court order dismissing Lorona’s fraud claims for reasons 

similar to those raised by the Law School’s present motion. To permit further 

amendment would drag out the litigation for no foreseeable benefit. Therefore, as to the 

parts of Lorona’s claims that will be dismissed, no further leave to amend will be granted. 

IT IS THEREFORE ORDERED that Defendant Arizona Summit Law School, 

LLC’s Motion to Dismiss (Doc. 35) Counts I, II, and III of the Third Amended 

Complaint (Doc. 34) is granted with prejudice only to the extent those Counts rely on 

fraud other than misrepresentation in enrollment statistics. The Motion is otherwise 

denied. 

IT IS FURTHER ORDERED that the parties may, as of the date of this order, 

begin discovery as to how many of the Law School’s students were Alternative students 

during the times relevant to Lorona’s fraud claims. This discovery shall conclude no 

later than Friday, July 15, 2016. 

IT IS FURTHER ORDERED that if the Law School deems the outcome of this 

discovery dispositive of Lorona’s fraud claims, it may file a motion for summary 

judgment to that effect no later than Monday, August 1, 2016. If no such motion is filed, 

the parties may then begin general discovery as to Lorona’s fraud claims. 

Dated this 17th day of May, 2016. 

Neil V. Wake

United States District Judge

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