Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-15-03888/USCOURTS-ca3-15-03888-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

---

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 15-3888 

_____________

JOHN HARNISH; JUSTIN SCHLUTH;

ROBERT KLEIN; GREGORY EMOND;

AYLA O’BRIEN KRAVITZ; CHRISTINA MARINAKIS,

 Appellants

v.

WIDENER UNIVERSITY SCHOOL OF LAW

_____________

On Appeal from the United States District Court for the 

District of New Jersey

(D.C. Civil No. 2-12-cv-00608)

District Judge: Hon. William H. Walls

_____________

Argued June 6, 2016

Before: CHAGARES, KRAUSE, and BARRY, Circuit

Judges.

(Filed: August 16, 2016)

Danielle F. Moriber, Esq.

Rachel E. Simon, Esq.

David S. Stone, Esq. (Argued)

Stone & Magnanini

100 Connell Drive, Suite 2200

Berkeley Heights, NJ 07922

Attorneys for Appellants

Suna Lee, I, Esq.

Thomas F. Quinn, Esq. (Argued)

Case: 15-3888 Document: 003112381955 Page: 1 Date Filed: 08/16/2016
2

Wilson, Elser, Moskowitz, Edelman & Dicker

200 Campus Drive, 4th Floor

Florham Park, NJ 07932

Dennis J. Drasco, Esq.

Lum Drasco & Positan

103 Eisenhower Parkway

Roseland, NJ 07068

Attorneys for Appellee

_______________

 OPINION

 _______________

CHAGARES, Circuit Judge.

This is an interlocutory appeal of a denial of class 

certification in a suit alleging that Widener University School 

of Law defrauded a putative class of law students by 

publishing misleading statistics about its graduates’ 

employment, which caused the students to pay “inflated” 

tuition. The District Court found, among other things, that 

the plaintiffs failed to meet the requirement in Rule 23(b)(3) 

of the Federal Rules of Civil Procedure that common 

questions predominate over individual questions in order for a 

class to be certified. We conclude that, although the District 

Court labored under a few misconceptions about the 

plaintiffs’ theory of the case, the errors were harmless and the 

court ultimately reached the correct result. Even when 

properly characterized, the plaintiffs’ theory is insufficiently 

supported by class-wide evidence, and therefore the plaintiffs 

have not established that common questions will 

predominate. For that reason, we will affirm. 

I.

Named plaintiffs John Harnish, Justin Schluth, Robert 

Klein, Gregory Emond, Ayla O’Brien Kravitz, and Christina

Marinakis are graduates of Widener University School of 

Law (“Widener”), a private law school with campuses in 

Harrisburg, Pennsylvania, and Wilmington, Delaware, who 

graduated from Widener between 2008 and 2011. In a 

complaint filed in the United States District Court for the 

Case: 15-3888 Document: 003112381955 Page: 2 Date Filed: 08/16/2016
3

District of New Jersey on February 1, 2012, and amended on 

April 27, 2012, they claim that Widener violated the New 

Jersey Consumer Fraud Act (“NJCFA”) and the Delaware 

Consumer Fraud Act (“DCFA”) by intentionally publishing 

and marketing misleading statistics about the employment of 

its graduates. 

Specifically, they allege the following. Between 2005 

and 2011, Widener reported that 90-97% of its students were 

employed after graduation. These numbers were widely and 

deliberately advertised in print and online publications, along 

with oral presentations, targeting prospective students. But in 

reality, only 50-70% of Widener graduates ended up in fulltime legal positions, which Widener knew. The school was 

including non-legal and part-time positions in its published

statistics without reporting the breakdown. When Widener

did provide a breakdown in its materials, it was a breakdown 

by employer type (private firm, business and industry, etc.) 

within the category of full-time legal employment, further 

misleading prospective students into believing that the 90-

97% number represented full-time legal employment. 

Beginning in 2011, Widener improved its reporting 

somewhat, by including a breakdown that distinguished 

between full-time legal positions and other jobs. But, 

according to the plaintiffs, Widener continued to gather 

information about its graduates in a manner that distorted the 

statistics by, for example, crediting unreliable secondhand 

accounts of graduates’ employment and avoiding responses 

from unemployed graduates. 

The plaintiffs claim that publishing misleading

employment statistics enabled Widener to charge its students 

“inflated” tuition — that is, higher tuition than what Widener

would have received if full and accurate statistics were 

published instead. Joint Appendix (“J.A.”) 90 (Amended 

Compl. ¶ 1). And they seek damages equal to the amount of 

tuition that students allegedly overpaid. Widener moved to 

dismiss the case, but the motion was denied on March 20, 

2013. The parties then engaged in discovery related to class 

certification. 

On February 2, 2015, the plaintiffs moved to certify a 

class of “[a]ll persons who enrolled in Widener University 

Case: 15-3888 Document: 003112381955 Page: 3 Date Filed: 08/16/2016
4

School of Law and were charged full or part-time tuition 

within the statutory period for the six-year period prior to the 

date the Complaint in this action was filed through the date 

that this Class is certified.” J.A. 210. A disputed issue 

regarding class certification was whether the plaintiffs could 

prove in class-wide fashion that all the class members 

suffered damages as a result of Widener’s actions. In 

addressing this issue, the plaintiffs introduced a report of 

economics expert Dr. Donald Martin. Dr. Martin attested that 

he would be able to estimate the extent to which Widener’s

misleading statistics inflated the tuition, which could serve as 

a class-wide estimate of every class member’s damages, 

insofar as every class member, by definition, paid tuition. In 

order to arrive at his estimate, he would perform a regression 

analysis of 64 private law schools’ published tuition and 

employment statistics and, by controlling for other variables, 

compute how much lower Widener’s tuition would be 

expected to be if full and accurate employment statistics were 

published instead. Noting that further discovery was 

forthcoming and complete data was unavailable, Dr. Martin 

did not provide a final estimate of class-wide damages. He 

did, however, conclude that there was a statistically 

significant relationship between employment rates and tuition 

prices across the 64 schools and that his regression 

methodology would be a reliable means of arriving at a final 

estimate of class-wide damages. 

On July 1, 2015, the District Court denied class 

certification on two grounds. First, it found that the plaintiffs 

could not meet Federal Rule of Civil Procedure 23(b)(3)’s 

requirement that common questions “predominate” over 

individual questions because they had “not shown that they 

c[ould] prove the proposed class members’ damages by 

common evidence.” J.A. 13. The District Court rejected Dr. 

Martin’s proposed class-wide method of proving damages, 

pointing to the variation in class members’ employment 

outcomes: some Widener graduates did obtain full-time legal 

jobs, and so their damages, if any, would be different from 

those of graduates who did not. The District Court also 

concluded that the proposed class-wide theory of damages

relied on a “fraud-on-the-market” theory, which New Jersey 

courts had rejected outside the federal securities fraud 

context. 

Case: 15-3888 Document: 003112381955 Page: 4 Date Filed: 08/16/2016
5

Second, the District Court found that the plaintiffs 

could not meet Rule 23(a)(3)’s requirement that the named 

plaintiffs’ claims be “typical” of the claims of the proposed 

class. Because the plaintiffs sought to certify a class of 

students enrolled “through the date this Class is certified,” the 

class would include students who enrolled in 2012 and 

beyond, after Widener had improved its reporting. This, 

according to the District Court, would render the named 

plaintiffs atypical in relation to large portions of the class 

because there would be different factual circumstances for the 

post-2011 enrollees. It also found that some class members 

might even have different interests than the named plaintiffs, 

insofar as those pursuing legal careers might prefer not to 

have Widener’s reputation tarnished by the lawsuit. 

The plaintiffs filed a timely petition for interlocutory 

review under Federal Rule of Civil Procedure 23(f), which we

granted. 

II.

The District Court exercised jurisdiction under 28 

U.S.C. § 1332. We have appellate jurisdiction under 28 

U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f). 

“We review a class certification order for abuse of discretion, 

which occurs if the district court’s decision rests upon a 

clearly erroneous finding of fact, an errant conclusion of law 

or an improper application of law to fact.” Neale v. Volvo 

Cars of N. Am., LLC, 794 F.3d 353, 358 (3d Cir. 2015)

(quotation marks omitted).

III.

The plaintiffs raise three challenges to the District 

Court’s finding that Rule 23(b)(3)’s predominance 

requirement was not met. We will address each challenge in 

turn and, for the reasons set forth below, affirm the District 

Court’s denial of class certification. 

A.

Case: 15-3888 Document: 003112381955 Page: 5 Date Filed: 08/16/2016
6

The plaintiffs’ first argument is that the District Court 

applied an improperly burdensome legal standard under Rule 

23(b)(3) by scrutinizing their class-wide evidence prior to full

merits discovery and demanding that they “conclusively 

prove class-wide damages.” Pls.’ Br. 36. They contend that 

the predominance inquiry should be “entirely divorced from 

the validity of [their] claims” and that the District Court was 

limited to assessing the “viab[ility]” of their theory, not its 

“valid[ity].” Id. at 35-36. We disagree. 

A plaintiff “may not merely propose a method of 

[meeting Rule 23’s requirements] without any evidentiary 

support.” Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 

2013). And trial courts “must engage in a rigorous analysis 

and find each of Rule 23[ ]’s requirements met by a 

preponderance of the evidence before granting certification.” 

Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 358 (3d Cir. 

2013) (citations and quotation marks omitted). They must do 

so even if it involves judging credibility, weighing evidence, 

or deciding issues that overlap with the merits of a plaintiff’s 

claims. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 

305, 316-25 (3d Cir. 2008). 

We have observed that “[t]he predominance inquiry is 

especially dependent upon the merits of a plaintiff’s claim, 

since the nature of the evidence that will suffice to resolve a 

question determines whether the question is common or 

individual.” In re Constar Int’l Inc. Sec. Litig., 585 F.3d 774, 

780 (3d Cir. 2009) (quotation marks omitted). “[B]efore a 

class is certified under [Rule 23(b)(3)], a district court must 

find that ‘questions of law or fact common to class members 

predominate over any questions affecting only individual 

members.’” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 

1036, 1045 (2016) (quoting Fed. R. Civ. P. 23(b)(3)). As 

defined by the Supreme Court, “[a]n individual question is 

one where members of a proposed class will need to present 

evidence that varies from member to member, while a 

common question is one where the same evidence will suffice 

for each member to make a prima facie showing [or] the issue 

is susceptible to generalized, class-wide proof.” Id.

(quotation marks omitted). Rule 23(b)(3) requires that “the 

common, aggregation-enabling, issues in the case [be] more 

Case: 15-3888 Document: 003112381955 Page: 6 Date Filed: 08/16/2016
7

prevalent or important than the non-common, aggregationdefeating, individual issues.” Id. (quotation marks omitted).

In determining whether issues that are “susceptible to 

generalized, class-wide proof” are “more prevalent or 

important,” id., a district court is called to “formulate some 

prediction as to how specific issues will play out . . . in a 

given case,” Hydrogen, 552 F.3d at 311. The court cannot 

rely on a mere “threshold showing” that a proposed classwide method of proof is “plausible in theory.” Id. at 321, 

325. Rather, the court’s Rule 23(b)(3) finding necessarily 

entails some analysis of whether the proposed class-wide 

evidence will actually be sufficient for the class to prevail on 

the predominant issues in the case. If class-wide evidence is 

lacking, the court cannot be adequately assured that 

individualized evidence will not later overwhelm the case and 

render it unsuitable for class-wide adjudication. This analysis 

will often resemble a merits determination, in that it relates to 

plaintiffs’ ability to prove the elements of their claims. 

But the analysis is not a merits determination. First, 

much like a court’s preview of the merits of a case when 

imposing a preliminary injunction, “the district court’s 

findings for the purpose of class certification are conclusive 

on that topic” but “do not bind the fact-finder on the merits.” 

Id. at 318 & n.19. Second, a court should not address meritsrelated issues “beyond what is necessary to determine 

preliminarily whether certain elements will necessitate 

individual or common proof.” Sullivan v. DB Invs., Inc., 667 

F.3d 273, 305 (3d Cir. 2011) (en banc). In certain situations, 

it may be unnecessary to analyze the class-wide evidence as 

to every issue in the case in order to reach a conclusion about 

Rule 23(b)(3). For example, if the court decides that the 

central, predominant issues in the case are common, then 

Rule 23(b)(3) is met despite the possibility that some 

subsidiary issues will require individualized evidence. Tyson, 

136 S. Ct. at 1045. Further, evidence as to an issue or 

element need not be produced at class certification where the 

very nature of the issue or element guarantees that all class 

members’ claims will “prevail or fail in unison,” and 

therefore there is “no risk whatever that a failure of proof on 

the common question . . . will result in individual questions 

Case: 15-3888 Document: 003112381955 Page: 7 Date Filed: 08/16/2016
8

predominating.” Amgen Inc. v. Conn. Ret. Plans & Trust 

Funds, 133 S. Ct. 1184, 1191, 1196 (2013). 

Thus, the task for the District Court was to determine

whether the plaintiffs’ proposed class-wide theories and

evidence would be sufficient to address the predominant

issues in the case. The issues in the case are defined by the

elements of a NJCFA/DCFA claim, which are: “(1) an 

unlawful practice, (2) an ascertainable loss, and (3) a causal 

relationship between the unlawful conduct and the 

ascertainable loss.” Gonzalez v. Wilshire Credit Corp., 25 

A.3d 1103, 1115 (N.J. 2011) (quotation marks omitted); 

accord Teamsters Local 237 Welfare Fund v. AstraZeneca 

Pharm. LP, 136 A.3d 688, 693 (Del. 2016).1

The plaintiffs criticize the District Court’s focus on 

“damages,” and they invoke the general rule that “individual 

damages calculations do not preclude class certification under 

Rule 23(b)(3).” Neale, 794 F.3d at 375. But the plaintiffs 

gloss over the fact that when courts speak of “damages,” they 

are often referring to two distinct concepts: the “fact of 

damage” and the measure/amount of damages. The fact of 

damage, often synonymous with “injury” or “impact,” is 

frequently an element of liability requiring plaintiffs to prove 

that they have suffered some harm traceable to the 

defendant’s conduct — in other words, the “ascertainable 

loss” and “causal relationship” requirements under the 

NJCFA and the DCFA. See Newton v. Merrill Lynch, Pierce, 

Fenner & Smith, Inc., 259 F.3d 154, 187-89 (3d Cir. 2001); In 

re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 269 (3d Cir. 

2009); In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535-

36 (6th Cir. 2008); In re New Motor Vehicles Canadian Exp. 

Antitrust Litig., 522 F.3d 6, 19 n.18, 28 (1st Cir. 2008). Only 

if the fact of damage is established does a court reach the 

question of remedy and the exact calculation of each 

plaintiff’s damages. “While obstacles to calculating damages 

may not preclude class certification, the putative class must 

 1 The parties have stipulated that there are no material 

differences between New Jersey and Delaware law 

concerning the issues in this case. Where appropriate, we 

have cited law from both states, but the majority of the 

authority comes from the New Jersey courts. 

Case: 15-3888 Document: 003112381955 Page: 8 Date Filed: 08/16/2016
9

first demonstrate economic loss” — that is, the fact of 

damage — “on a common basis.” Newton, 259 F.3d at 189. 

We are confident that, in scrutinizing the plaintiffs’ 

proposed class-wide theory and evidence of damages, the 

District Court was concerned not merely with the plaintiffs’ 

ability to calculate the precise measure of damages, but rather 

with their ability to demonstrate the fact of damage —

“ascertainable loss” and a “causal relationship” — class-wide. 

Ascertainable loss and a causal relationship being core 

elements of liability under the NJCFA and the DCFA, it was 

entirely appropriate for the District Court to examine the 

plaintiffs’ theory of damages and the proof supporting it. 

As to the plaintiffs’ general objection to the level of 

scrutiny that the District Court applied to their class-wide 

evidence, we see no indication that the District Court applied 

the wrong legal standard. For the reasons already elaborated, 

closely scrutinizing the plaintiffs’ proposed class-wide 

method of proof was the District Court’s duty under Rule 23 

and did not, as the plaintiffs argue, transform the court’s 

decision into a premature merits determination. Nor did the 

District Court purport to be deciding the merits of the case 

“conclusively,” as the plaintiffs now assert. The District 

Court’s analysis of the evidence was in service of predicting 

whether the class-wide proof would ultimately suffice, which 

it was required to do. And whatever distinction the plaintiffs 

are attempting to draw between “viable” class-wide proof and 

“valid” class-wide proof, the law is clear that a class-wide 

method of proof must be more than “plausible in theory” and 

that a district court is to consider “all relevant evidence and 

arguments” in predicting whether the class-wide proof will 

suffice. Hydrogen, 552 F.3d at 325. Whether the District 

Court reached the correct conclusion after considering the 

evidence and arguments is a separate issue that we will 

address below. 

B.

Next, the plaintiffs argue that the District Court 

erroneously attributed significance to the fact that some 

Widener graduates do obtain full-time legal employment 

(meaning that some class members suffered little, if any, 

Case: 15-3888 Document: 003112381955 Page: 9 Date Filed: 08/16/2016
10

damage to their career prospects), effectively ignoring that the 

plaintiffs’ theory of damages is unrelated to class members’ 

actual employment outcomes. In other words, they argue that 

the District Court injected an individualized question 

(employment outcomes) that has never been at issue because 

they claim damages only in the form of overpaid tuition, 

which is common to all Widener graduates regardless of their 

employment outcomes. While we agree that class members’ 

own individual employment outcomes are not at issue in this 

case, we conclude that the error was harmless because, as 

discussed in a later portion of this opinion, the inflated-tuition 

theory of damages that is at issue has not been adequately 

supported by class-wide evidence, which precludes class 

certification under Rule 23(b)(3). 

It is apparent that the plaintiffs’ proposed theory of the 

case does not involve an assessment of class members’ own 

individual employment outcomes — a point that Widener 

appears to concede. Although the amended complaint does 

request “damages” in general language, in several places it 

frames the damages in terms of “inflated tuition.” J.A. 116-

22. The plaintiffs also made clear in their brief in support of 

class certification that inflated tuition was their sole proposed 

theory of damages. And they have done so in their briefing 

before us. 

Further, in the abstract, we perceive no conceptual 

problem with the plaintiffs’ proposed theory. The NJCFA 

and the DCFA both contemplate so-called “out-of-pocket” 

damages. Under the out-of-pocket rule, a plaintiff’s damages

are “the difference between the price paid and the actual 

value of the property acquired.” Romano v. Galaxy Toyota, 

945 A.2d 49, 57 (N.J. Super. Ct. App. Div. 2008); accord

Stephenson v. Capano Dev., Inc., 462 A.2d 1069, 1076 (Del. 

1983). That is exactly what the plaintiffs are seeking. Pls.’ 

Br. 17-18 (“Plaintiffs seek the difference between the tuition 

that students paid and tuition that they would have paid in the 

absence of Widener’s misleading marketing . . . .”); 24-25 

(“The only loss Plaintiffs seek to recover is the incremental 

difference between the amount of tuition that Widener could 

have charged but for its fraudulent mass-marketing scheme 

and the tuition it actually charged.”). 

Case: 15-3888 Document: 003112381955 Page: 10 Date Filed: 08/16/2016
11

Neither the “price paid” nor the “actual value” depends 

on class members’ own individual employment outcomes. 

For the price paid, that is self-evident. For the actual value, it 

is less obvious. Actual value in a fraud case is generally 

“determined as of the time of the transaction.” Kaufman v. 

Mellon Nat’l Bank & Trust Co., 366 F.2d 326, 331 (3d Cir. 

1966) (applying Pennsylvania law); Sands v. Forrest, 434 

A.2d 122, 124 (Pa. Super. Ct. 1981) (“[I]n an action for fraud 

and deceit the measure of damages is the difference in value 

between the real, or market, value of the property at the time 

of the transaction and the higher, or fictitious, value which the 

buyer was induced to pay for it.”).2

 In the fraud context, the 

actual value of a degree program therefore does not depend 

on a student’s own individual post-graduation employment 

outcome, because no one knows at the time of enrollment

what that outcome will be. Some students will ultimately 

obtain full-time legal jobs after graduation while others will 

not, but at the time of enrollment, the Widener degree offers 

them a particular probability of full-time legal employment. 

It is the time-of-enrollment probability of full-time legal 

employment (which the then-available aggregate employment

statistics help to predict), rather than an individual student’s 

own future employment outcome, that affects the true/actual 

market value of a Widener education.3

The plaintiffs’ theory is therefore that, irrespective of 

what ultimately happened to class members after graduation, 

the actual value of their Widener education depended in part 

 2 To the extent that the “market” price at the time of 

the transaction might itself be inflated due to widespread 

dissemination of the misrepresentation, one must ascertain the 

fair price that would be paid if the broader market knew the 

truth. See Restatement (Second) of Torts § 549 cmt. c. 

3 As a loose analogy, a lottery ticket’s actual value at 

sale does not retroactively plummet to zero the moment a 

purchaser loses or skyrocket the moment a purchaser wins. If 

the odds were honestly presented, all purchasers received 

exactly what they paid for, and neither a loser nor a winner 

could claim any damages. And if the odds were 

misrepresented, both players would have the same damages 

arising from the fraud — namely, they were overcharged for 

placing their bets. 

Case: 15-3888 Document: 003112381955 Page: 11 Date Filed: 08/16/2016
12

on the probability of full-time legal employment that they 

faced when enrolling. Thus, all class members ended up 

paying more than Widener’s actual value because the 

published employment statistics (the key indicators of the 

probability of full-time legal employment) were misleadingly 

optimistic in comparison to the reality of the situation. 

We suspect that when it noted the significance of 

varying individual employment outcomes, the District Court 

may have had in mind a different theory of damages known 

as the “benefit-of-the-bargain” rule, which is also available 

under the NJCFA and the DCFA. Under this rule, a plaintiff 

can claim damages “equal to that which [the] plaintiff would 

have received had the representation been true,” Finderne 

Mgmt. Co. v. Barrett, 955 A.2d 940, 957 (N.J. Super. Ct. 

App. Div. 2008) (quotation marks omitted), sometimes also 

referred to as the “replacement cost,” “replacement value,” or 

the “diminution” or “loss in value” from the purchaser’s 

“expectation interest,” Lee v. Carter-Reed Co., 4 A.3d 561, 

576 (N.J. 2010); Thiedemann v. Mercedes-Benz USA, LLC, 

872 A.2d 783, 789, 792 (N.J. 2005); Furst v. Einstein 

Moomjy, Inc., 860 A.2d 435, 440-42 (N.J. 2004); accord

Stephenson, 462 A.2d at 1076. The District Court noted that 

some Widener students “actually got the advertised jobs” —

saying, in effect, that they got what they were promised (a 

benefit-of-the-bargain perspective), rather than that they got 

something worth what they paid (an out-of-pocket 

perspective). J.A. 60. If full-time legal employment postgraduation was in fact the “advertised” benefit of the bargain, 

then employment outcomes would be relevant to benefit-ofthe-bargain damages. But we are skeptical of the notion that

Widener was guaranteeing any particular employment 

outcome. More likely, the represented value of a Widener 

education to a particular student, like its actual value, is a 

function of the probabilistic career-advancing potential of the 

education (as claimed, in the case of represented value, versus 

as truly existing, in the case of actual value), irrespective of 

whether that individual student ultimately realizes the 

potential. 

In any event, we do not understand the plaintiffs to be 

seeking benefit-of-the-bargain damages. Although the 

plaintiffs have not explicitly invoked the out-of-pocket rule 

Case: 15-3888 Document: 003112381955 Page: 12 Date Filed: 08/16/2016
13

rather than the benefit-of-the-bargain rule and have cited 

cases involving both rules, they describe the damages they 

seek in out-of-pocket terms. So even if class members’ own 

individual employment outcomes would be relevant to 

determining the represented value of the bargain, they are not 

relevant to this case. 

In this respect, the District Court appears to have 

mischaracterized the plaintiffs’ theory of damages and 

thereby incorporated an individualized issue that was 

irrelevant to the case before it. Further, we cannot agree with 

Widener that the District Court’s discussion of class 

members’ differing employment outcomes was a mere aside 

that had no impact on the court’s analysis. The District Court 

clearly attributed some significance to the individual 

employment outcomes. 

We conclude, however, that the mischaracterization 

was harmless because the District Court would very likely 

have reached the same decision regarding Rule 23(b)(3)’s 

predominance requirement despite the mischaracterization. 

Eliminating any focus on class members’ actual employment 

outcomes would have removed one individualized inquiry. 

But even when the plaintiffs’ inflated-tuition theory is 

properly understood, the crucial overarching issue in the case 

— proving that each class member suffered damages as a 

result of Widener’s actions — still must be shown to be 

susceptible to class-wide proof. We now turn to that issue.4

 

C.

Finally, the plaintiffs argue that the District Court 

erred in equating their theory with the non-cognizable, 

 4 The plaintiffs contend that the District Court not only 

mischaracterized their theory of damages but also, in doing 

so, violated the law-of-the-case doctrine, because the court, in 

its earlier decision denying Widener’s motion to dismiss, had 

deemed class members’ own individual employment 

outcomes to be irrelevant to the plaintiffs’ case. Having 

already concluded that the District Court’s discussion of class 

members’ employment outcomes was erroneous but harmless, 

we have no need to address this argument. 

Case: 15-3888 Document: 003112381955 Page: 13 Date Filed: 08/16/2016
14

reliance-based “fraud-on-the-market” theory, and contend 

that they have sufficient class-wide evidence to support a 

non-reliance-based inflated-tuition theory. The plaintiffs are 

correct that “fraud on the market” is not quite the proper label 

for their theory, and correct that they are free to pursue nonreliance-based theories of damages. But among non-reliancebased theories, the plaintiffs’ chosen inflated-tuition theory 

— whatever might be said about its plausibility — belongs to 

the “price-inflation” species that, like the fraud-on-the-market 

theory, has been rejected by the New Jersey and Delaware 

courts outside the federal securities fraud context. We 

therefore reach the same conclusion as the District Court, 

despite employing slightly different terminology: the 

plaintiffs fail to meet the predominance requirement of Rule 

23(b)(3) because the only class-wide evidence of damages 

that they offer supports a non-cognizable theory.

As discussed above, the plaintiffs appear to be 

pursuing out-of-pocket damages, claiming that Widener’s 

misrepresentations caused them to pay more for their 

education than it was truly worth. Under this theory, we look 

to the injuries that resulted from the defendant’s having made 

the misrepresentation in the first place, and the goal is to 

return the plaintiffs to the position that they would have 

occupied if the misrepresentation had never been made. See, 

e.g., Stephenson, 462 A.2d at 1076; Restatement (Second) of 

Torts § 549 cmt. g (1977); Michael B. Kelly, The Phantom 

Reliance Interest in Tort Damages, 38 SAN DIEGO L. REV.

169, 171-76 (2001).

5

 In an ordinary fraud case, this would 

 5 A benefit-of-the-bargain claim, by contrast, is 

contract-like. We look to the injuries that resulted from the 

defendant’s having not lived up to the misrepresentation, and 

the goal is to place the plaintiffs in the position that they 

would occupy if the misrepresentation were true. See Furst, 

860 A.2d at 441-42; Stephenson, 462 A.2d at 1076; Smajlaj 

v. Campbell Soup Co., 782 F. Supp. 2d 84, 101-02 (D.N.J. 

2011); Kelly, supra, at 171-76. We do not interpret the 

plaintiffs’ argument as a benefit-of-the-bargain claim because 

the success of such a claim would not depend on proving that 

the misrepresentation caused higher purchase prices. A 

benefit-of-the-bargain class action logically does not entail 

proving that all class members were induced to pay extra (a 

Case: 15-3888 Document: 003112381955 Page: 14 Date Filed: 08/16/2016
15

require the plaintiffs to prove that the misrepresentation 

entered their decision-making and induced them to pay more 

for something than they would have otherwise — in other 

words, prove reliance. But the plaintiffs do not purport to 

have class-wide proof of reliance, in the traditional sense, on 

the part of every single class member. Nor could they; 

reliance is nearly always an individualized question, requiring 

case-by-case determinations of what effect, if any, the 

misrepresentation had on plaintiffs’ decision-making.6

 

 

reliance-based theory) or even that the defendant was 

empowered to charge them all extra (the price-inflation 

theory that the plaintiffs have unsuccessfully pursued in this 

case, discussed infra). Instead, it entails proving that class 

members all reasonably expected more from the bargain than 

what they received. Marcus v. BMW of N. Am., LLC, 687 

F.3d 583, 607-08 (3d Cir. 2012); Smajlaj, 782 F. Supp. 2d at 

99-100. 6 For example, where “a plaintiff cannot invoke the 

fraud-on-the-market presumption” in a securities fraud case, 

“[s]he can . . . attempt to establish reliance through the 

traditional mode of demonstrating that she was personally 

aware of [the defendant’s] statement and engaged in a 

relevant transaction . . . based on that specific 

misrepresentation,” but “[i]ndividualized reliance issues 

would predominate in such a lawsuit.” Amgen, 133 S. Ct. at

1199 (quotation marks omitted).

Without the aid of the broad presumption afforded by 

the fraud-on-the-market theory, plaintiffs will rarely be able 

to prove in class-wide fashion that all class members relied on 

misrepresentations and were induced to pay more for 

something than they would have otherwise. In Lee, the New 

Jersey Supreme Court recognized that, where there are 

extraordinary facts involving a “worthless product” about

which “all the representations . . . are baseless,” “a trier of 

fact may fairly infer that a[ll] consumer[s] purchasing the 

product w[ere] influenced, in some way or other, by the falsemarketing scheme.” Lee, 4 A.3d at 580 (emphasis added). 

But the court also recognized that, in the absence of such a 

situation, determining whether each “purchaser bought the 

product based on a fictional or real benefit” — here, the 

misleading employment statistics versus Widener’s many 

other real attributes — remains “a perplexing problem, the 

Case: 15-3888 Document: 003112381955 Page: 15 Date Filed: 08/16/2016
16

The District Court appears to have believed that the 

plaintiffs were attempting to prove reliance class-wide by 

way of the “fraud-on-the-market” presumption. It likely 

believed so because the goal of Dr. Martin’s analysis was to 

prove that the market that determines law school tuition 

prices is an “efficient” market, meaning a market in which 

price responds to publicly available information about the 

value of the product. But an “efficient-market” theory and a 

“fraud-on-the-market” theory are not the same, even though, 

as shorthand, courts sometimes use the terms interchangeably.

The connection between the two terms comes from the

federal securities fraud context, where courts will often find 

an efficient market to exist, in which “information important 

to reasonable investors . . . is immediately incorporated into 

stock prices.” In re Burlington Coat Factory Sec. Litig., 114 

F.3d 1410, 1425 (3d Cir. 1997). Once a securities market is 

found to be efficient, the fraud-on-the-market theory employs 

the efficient-market finding as the “intellectual underpinning” 

for why individualized proof of reliance is not required. 

Kaufman v. i-Stat Corp., 754 A.2d 1188, 1198 (N.J. 2000). 

The theory “‘is based on the hypothesis that, in an open and 

developed securities market, . . . [m]isleading statements will 

. . . defraud purchasers of stock even if the purchasers do not 

directly rely on the misstatements.’” Basic Inc. v. Levinson, 

485 U.S. 224, 241-42 (1988) (quoting Peil v. Speiser, 806 

F.2d 1154, 1160 (3d Cir. 1986)). As we have explained in 

greater detail: 

The fraud-on-the-market theory creates a 

threefold presumption of indirect reliance. 

First, [per an efficient-market finding,] this 

court presumes that the misrepresentation 

affected the market price. Second, it presumes 

that a purchaser did in fact rely on the price of 

the stock as indicative of its value. Third, it 

presumes the reasonableness of that reliance. 

All of these presumptions are necessary to 

establish actual reliance. The first presumption 

is necessary to find that a misrepresentation was 

 

resolution of which would depend on a number of individual 

inquiries.” Id. at 579. 

Case: 15-3888 Document: 003112381955 Page: 16 Date Filed: 08/16/2016
17

in fact made to the purchaser. Thus, if 

defendant rebuts this presumption by showing 

that the market did not respond to the 

misrepresentation, it does no more than show 

that the market price was not misrepresentative, 

and thus that no misrepresentation was made to 

the purchaser of the stock. The second 

presumption is necessary for a court to find that 

the plaintiff did in fact rely on the 

misrepresentation. Thus, a defendant may rebut 

this presumption by showing that the plaintiff 

would have purchased even if he had known 

about the misrepresentation. The final 

presumption, that reliance on the market price is 

reasonable, may be rebutted by showing that the 

plaintiff knows that a representation is false.

Zlotnick v. TIE Commc’ns, 836 F.2d 818, 822 (3d Cir. 1988) 

(emphasis added); see also Peil, 806 F.2d at 1161. 

Plaintiffs who claim that a market is efficient, 

accordingly, may try to invoke the fraud-on-the-market 

presumption, because an efficient market is a precondition of

the fraud-on-the-market theory. But some plaintiffs, 

including the plaintiffs in this case, may have other reasons 

for claiming that a market is efficient.

7

 Although the District 

Court was correct that the New Jersey courts have declined to 

extend the fraud-on-the-market presumption beyond the

federal securities fraud context, Kaufman, 754 A.2d at 1200-

01, that was beside the point because the plaintiffs have not 

 7 At one point in their briefing, the plaintiffs muddy 

the waters by appearing to disclaim even an efficient-market 

theory. They argue that “the inquiry is not whether 

Widener’s tuition responded to employment data, but what 

Widener’s tuition would have been absent its fraudulent 

marketing scheme.” Reply Br. 17 n.8. But that sentence is 

incoherent and incompatible with the thrust of their argument. 

They cannot claim that tuition would have been different 

“absent [a] fraudulent marketing scheme” involving 

employment data unless they also believe that “tuition 

respond[s] to employment data.” 

Case: 15-3888 Document: 003112381955 Page: 17 Date Filed: 08/16/2016
18

quite invoked the fraud-on-the-market presumption.8

 The 

plaintiffs do not and need not argue the fraud-on-the-market 

theory because, as they rightly point out, the NJCFA and the 

DCFA do not require reliance on a misrepresentation in order 

to establish a “causal relationship” between that 

misrepresentation and an “ascertainable loss,” and other nonreliance forms of “causal relationship” (under a “proximate 

cause” standard) are permissible. Marcus v. BMW of N. 

Am., LLC, 687 F.3d 583, 606 (3d Cir. 2012); Lee, 4 A.3d at 

576, 580; AstraZeneca, 136 A.3d at 693-94. See generally

supra note 5 (discussing benefit-of-the-bargain claims); John 

C. P. Goldberg et al., The Place of Reliance in Fraud, 48 

ARIZ. L. REV. 1001, 1004-14 (2006) (discussing examples of 

how causation can still exist when reliance is lacking). What 

the plaintiffs seek to establish is the existence of an efficient 

market for law school tuition — which is a prerequisite to, 

rather than an element established by, a fraud-on-the-market 

argument. 

The plaintiffs have placed market efficiency at issue 

by citing Dr. Martin’s analysis suggesting that tuition at 

Widener and elsewhere responds to public information, 

including employment statistics. In that respect, the District 

Court’s analysis was correct. But the plaintiffs do so not to 

benefit from a presumption of reliance but rather for the 

purpose of supporting their theory of “price inflation.” Given 

their out-of-pocket damages claim, the plaintiffs must prove 

that Widener’s publication of misleading employment 

statistics worsened all class members’ positions, by causing 

them to pay more for something than it was worth. The 

existence of an efficient market, they argue, would permit 

them to prove that all class members’ positions were 

worsened by the publication of misleading employment 

statistics because Widener, as an efficient-market actor 

responding to those statistics, charged everyone higher 

tuition, regardless of whether the statistics impacted each 

individual class member’s decision-making as a consumer. 

 8 As with the District Court’s mischaracterization of 

the relevance of class members’ own individual employment 

outcomes, we are confident that the misapplied “fraud-on-themarket” label was harmless and that the District Court’s 

concerns about the plaintiffs’ class-wide proof were valid. 

Case: 15-3888 Document: 003112381955 Page: 18 Date Filed: 08/16/2016
19

That is, rather than proving that the misrepresentations 

induced each class member to pay more, they propose to 

prove that the misrepresentations empowered Widener to 

charge more across the entire market. 

There is some plausibility to this theory, insofar as law 

schools operate in a largely fixed-price market, not an 

auction-style market with individually matched asks and bids. 

Widener does not ask around to determine the highest price 

that it can charge each prospective student. One would 

imagine that Widener guesses the wisest across-the-board 

tuition to charge based on a reading of the market and a selfassessment of how prospective students, as a whole, perceive 

the school, including its employment statistics.9

 It arguably 

does not matter that some prospective students might be 

entirely unaware of or unconcerned by Widener’s 

employment statistics (and, if they were bidders in an 

auction-style market, would not change their bids in response 

to different employment statistics). The point is that Widener 

might be expected to anticipate greater student demand in 

response to misleading employment statistics and thus to 

charge all students a higher price than it would have if it had 

published full and accurate statistics instead. 

The problem for the plaintiffs is that the state courts 

have held that the ascertainable-loss and causal-relationship 

elements of the NJCFA and the DCFA are not met by the 

kind of price-inflation theory discussed above and advanced 

by the plaintiffs. In International Union of Operating 

Engineers Local No. 68 Welfare Fund v. Merck & Co., 929 

A.2d 1076 (N.J. 2007) (per curiam), the New Jersey Supreme 

Court rejected the plaintiff’s attempt “to prove only that the 

price charged for Vioxx was higher than it should have been 

as a result of defendant’s fraudulent marketing campaign, and 

. . . thereby to be relieved of the usual requirements [of]

prov[ing] an ascertainable loss.” Id. at 1088. The court’s 

“rejection of the theoretical basis for that proof mechanism 

remove[d] it as a potential common question entirely,” and 

thus individualized questions about how the “diverse group” 

 9 Financial aid packages are, of course, a means of 

customizing the price somewhat to respond to individual 

students’ price thresholds. 

Case: 15-3888 Document: 003112381955 Page: 19 Date Filed: 08/16/2016
20

of class members reacted to the alleged fraud predominated 

instead and precluded class certification. Id. at 1087, 1088; 

see also Dabush v. Mercedes-Benz USA, LLC, 874 A.2d 

1110, 1121 (N.J. Super. Ct. App. Div. 2005); N.J. Citizen 

Action v. Schering-Plough Corp., 842 A.2d 174, 178-79 (N.J. 

Super. Ct. App. Div. 2003). Similarly, in AstraZeneca, the 

Delaware Supreme Court rejected the plaintiffs’ attempt to 

establish damages based on the mere fact that they “would 

have paid a lower ‘market’ price if all [market] participants 

had been fully informed.” AstraZeneca, 136 A.3d at 696-97. 

What mattered instead was that the plaintiffs themselves were

fully informed that the advertising was misleading. Id. 

The state courts, like the District Court in this case,

have emphasized that recognizing “price inflation” as a 

“cause” of “ascertainable loss” is essentially the same as 

extending the fraud-on-the-market presumption to all 

consumer-fraud cases. The practical effect of both theories is 

indeed the same, and both depend on the existence of an 

efficient market. There is a conceptual difference between a 

“fraud-on-the-market” theory and a “price-inflation” theory 

— the former deems a price to be a representation and 

presumes that buyers relied on it, whereas the latter sidesteps 

reliance altogether. The distinction, however, is immaterial 

because the state courts have refused to recognize either 

theory outside the federal securities fraud context.10 

 10 Even if a price-inflation theory were cognizable 

under state law, the plaintiffs would still be required to do 

more than propose it as an economically plausible theory; 

they would need to provide proof that price inflation actually 

occurred on this occasion, as a result of the specific 

misrepresentation at issue. We have serious doubts about 

whether they could do so. They offer no direct evidence that 

Widener changed its prices in response to the employment 

statistics that it published and their anticipated effect on the 

overall market. It appears that the plaintiffs did at one point 

seek discovery of “[a]ny information related to Widener’s 

strategies, methodologies, policies, and procedures regarding 

the setting of Widener’s tuition prices,” to which Widener 

objected. D.C. Dkt. No. 59, at 10, 12. But it is the plaintiffs’ 

burden to build a record to support class certification, and 

they did not pursue the discovery issue below or on appeal. 

Case: 15-3888 Document: 003112381955 Page: 20 Date Filed: 08/16/2016
21

The plaintiffs have therefore failed to propose a 

cognizable theory of damages that is sufficiently supported by 

class-wide evidence. And because the fact of damages (an 

“ascertainable loss” having a “causal relationship” with 

Widener’s conduct) is a crucial issue in the case, the inability 

to resolve it in class-wide fashion will cause individual 

questions to predominate over common ones, which 

precludes class certification.11

 

All we have is Dr. Martin’s analysis of data from 64 

private law schools and his preliminary estimate of the dollar 

amount by which “average tuition costs” rose across that 64-

school sample for each “percentage point increase in reported 

employment.” J.A. 341. The plaintiffs would therefore have 

the fact-finder infer that because tuition prices across 64 

private law schools tend to vary with employment statistics, 

Widener’s tuition price was influenced by its employment 

statistics on this occasion. Cf. Tyson, 136 S. Ct. at 1046, 

1048 (observing that “statistical evidence . . . is a permissible 

method of proving classwide liability . . . [if] each class 

member could have relied on th[e] sample to establish 

liability if he or she had brought an individual action” but that 

statistical evidence would not suffice if the class members

“were not similarly situated”). 

According to Dr. Martin, his regression equation 

represents the best possible fit for all the data from 64 

schools, and we have no reason to think otherwise. But that 

strikes us as a separate question from whether the equation 

represents a good fit for Widener. For all we know after 

consulting Dr. Martin’s rather brief analysis, Widener could 

be an outlier. In any event, the rejection of the price-inflation 

theory by controlling authority makes it unnecessary for us to 

decide what a fact-finder could reasonably infer about 

Widener’s conduct from Dr. Martin’s analysis of data from 

64 private law schools. 

11 Affirming the District Court as to Rule 23(b)(3)’s 

predominance requirement makes it unnecessary for us to 

consider the plaintiffs’ challenges to the District Court’s 

finding that Rule 23(a)(3)’s typicality requirement was also 

not met. 

Case: 15-3888 Document: 003112381955 Page: 21 Date Filed: 08/16/2016
22

IV.

For the foregoing reasons, the order of the District 

Court will be affirmed.

Case: 15-3888 Document: 003112381955 Page: 22 Date Filed: 08/16/2016