SAN DIEGO (CN) - Litigation over allegedly misleading ads promoting a California Bar Exam review course will proceed after a federal judge rejected both sides' motions for summary judgment.
U.S. District Judge M. James Lorenz said he could not rule that ads for Themis Bar Review LLC were misleading as a matter of law, and that he could not rule they were not misleading.
"A reasonable jury could conclude either way," Lorenz wrote in a 13-page order Thursday.
Lorenz's ruling coincidentally came out the same day a San Diego Superior Court jury rejected a long-running challenge to advertisements about graduate employment rates touted by the Thomas Jefferson School of Law in San Diego.
Themis's 2013 advertisement boasted that students who took its review course outperformed the average bar exam pass rate in various states. For instance, it claimed that 75 percent of its students passed the California Bar Exam and 90 percent passed in New York.
The state average for first-time exam-takers in California that July was about 68 percent and was about 78 percent in New York.
An asterisk at the top of the ad led readers to a footnote in small print: "Based on Themis first-time takers who completed 75% or more of their course assignments and on state bar exam first-time takers."
Exam-preparation giant Kaplan Inc., which produces the nation's No. 2 bar review course, challenged the ad as false or misleading. Themis responded in January 2014 by suing Kaplan, seeking declaratory relief that its ad was truthful and did not violate the federal Lanham Act ban on false advertising.
Kaplan then counterclaimed for an injunction against the ad.
Themis's lawsuit noted that Kaplan ran ads for its Bar review course labeled "Kaplan Beats BARBRI - again*!" and also pointed students to a clarifying footnote in small print.
In its motion for summary judgment, Themis said the dispute is moot because it has modified its ads to boost the size and clarity of the text qualifying the pass-rate statistics. Lorenz ruled nonetheless that the company had "failed to provide adequate assurances it will not run advertisements similar to the tested ad in the future."
Themis also argued that its pass rate advertising was literally true and not misleading, though Kaplan disputed both claims.
Kaplan said the Themis data were false for states that do not report overall pass-rate statistics, leaving Themis to rely on students' statements about whether they passed or failed, which could be subject to self-reporting error.
Themis countered that no failing student would claim to have passed the exam and thereby lose out on retaking the review course for free.
Lorenz found that a jury could find Themis's argument persuasive but that "a material dispute of fact as to the soundness of Themis's data collection processes and the pass rates thus derived" prevents summary judgment.
Both sides submitted reports from experts on whether the ads were misleading. This led Lorenz to discuss whether a "memory test" - in which subjects looked at the ad, put it down and then answered questions - or a "reading test" - in which they answered questions with the ad in hand - was more accurate.
Kaplan's expert used a memory test, which Lorenz concluded was good enough to create a material dispute of fact about whether Themis's ad could mislead students.
Lorenz noted that Themis's memory-test study did not test the actual ad that the company used. Instead, it "tested two different ads that each contained a significantly more prominent footnote than the Themis Ad Kaplan sued upon."
Therefore, he denied Themis's motion for summary judgment.
He also denied Kaplan's motion. Themis argued that no student had complained about the challenged ad, that law students are trained to read fine print and are motivated to pay close attention to ads about which vital and expensive Bar review course to take.
Themis, founded in 2008, charges $1,595 for its California course, according to its lawsuit, while Kaplan charges $2,290.
"Thus, notwithstanding Kaplan's survey evidence to the contrary, the Court cannot hold, as a matter of law, that a law student is 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 when there is evidence that no student has ever complained of being misled," Lorenz ruled.
Lorenz scheduled a pretrial conference for late June.
But Themis's lead attorney Kenneth Fitzgerald, with Fitzgerald Knaier, said "it would make no sense to go to trial" because his client changed the format of its ads and has not used the challenged ad for several years.
"We think the whole case is moot. Judge Lorenz obviously didn't agree," Fitzgerald told Courthouse News.
Kaplan's lead attorney Neal Klausner, with Davis and Gilbert in New York City, was unavailable for comment Monday.
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