Friday, October 3, 2014

A Tale of Two Scams.



Those few among our readers who are amateur numismatists, as well as those many who have a bleak view of human nature, might appreciate the tale of Rocco Marini and his friend Harold Adamo Jr., as set forth in Marini v. Adamo, 995 F. Supp.2d 155 (E.D.N.Y. 2014).

http://www.leagle.com/decision/In%20FDCO%2020140207B67

As a young man, Marini made millions of dollars selling sweaters to flea markets. Subsequently, Marini and his wife became close friends with the Adamos. The Court briefly sketches the relationship:  
"Mrs. Marini met Mrs. Adamo in May 1992 when they both lived on the same block in Manhasset Hills, New York. The Marinis and the Adamos became close friends, they are godparents to each other’s children. The families spent a considerable time socializing with one another and traveling together. In 2002, approximately 10 years after they became friends, the Adamos surprised the Marinis by unexpectedly joining them during a Caribbean vacation."  
Marini, 995 F. Supp.2d at 165 (internal citations omitted).  
Adamo was a coin dealer and suggested that Marini invest in coins through him. Displaying less acumen as a coin buyer than he did as a flea market sweater wholesaler, Marini bought coins exclusively through Adamo over course of six years to the tune of 12 million dollars, and relied solely on Adamo regarding which coins to buy. Friendship notwithstanding, Adamo’s mark-ups were substantial. "[T]he highest markup of all occurred when Adamo purchased a 1888 $1 Morgan Silver Dollar in April 2003 for $200 and then sold the exact same coin to Marini in December 2003 for $100,000." Marini, 995 F. Supp.2d at 168. 

In 2008, after finally consulting another coin dealer about the true value of some specimens in his collection, Marini sued Adamo for common law fraud, as well as for securities fraud, breach of fiduciary duty, and unjust enrichment, and prevailed at trial. But wait! After trial, defendant’s alert counsel notified the Court of some recent authority in his favor as to the element of "reasonable reliance"-- namely, an opinion dismissing a class action fraud lawsuit against a law school. The Court, however, was not persuaded.
"After post-trial briefing in this matter was complete, defendant[ ]. . . direct[ed] the Court's attention to a recent opinion . . dismiss[ing] a lawsuit by law school graduates claiming that the law school's publication of misleading statistics was an act of fraud because, inter alia, reliance on such statistics was "not justifiable as a matter of law, given the other sources of information that were available to plaintiffs." However, as the Court has noted, plaintiff[ ] reasonably relied on Adamo's misrepresentations because valuations for these coins was not readily available to an unsophisticated investor such as Marini; this information was certainly far more difficult to find than statistics on employment following law school. In any event, even if coin valuations were more widely available, Adamo is still liable under New York common law because, as discussed infra, he had a broader duty to speak because of his fiduciary relationship with Marini."
          Marini, 995 F. Supp.2d at 198 n.28 (internal citation omitted)

I do not want to address the murky subject of fiduciary duty as it bears on a common law fraud claim other to echo Paul Campos’s opinion that it seems odd and unjust that, although courts are willing to deem all manner of relationships to be fiduciary, they invariably find that a student-University relationship is merely contractual. 

Rather, I note the Court’s statement that, during the relevant time, coin valuation was less readily available than accurate placement statistics for law grads. It is one of those very dubious distinctions that courts sometimes make to reach a just or desired result.

I mean-- during the time frame when Marini was buying all those coins (2002-2008) what sources of information on placement did law students have besides the law schools themselves and US News & World Report (which obtained much of its data from the law schools)? A coin collector, by contrast, had access to the famous "Red Book," "Black Book," and "Blue Book"-- three annual publications that estimate the value of every U.S. coin by date, mint, and condition. Plus there are are coin dealers galore that offer free appraisals. These sources may not provide the precise or reliable valuation for rare coins that harder-to-discover recent auction prices might, but they certainly offer ballpark figures.

Why did courts find that law students should have been more skeptical and informed, but not this coin buyer? Who is typically more naive and vulnerable-- a 22 year-old recent college grad or a multi-millionaire businessman? Maybe the court believed, without quite saying, that the behavior of the coin dealer was more depraved than that of the law schools. But is selling a coin worth $200 for $100,000 any less cruel or damaging than using inflated and misleading placement stats to peddle a non-first tier JD degree for $100,000+ --a degree that turns out to be worthless to a very substantial number of its buyers and that comes with huge opportunity costs and a real stigma in addition to the purchase price?

Adamo was a businessman and his goal was profit. Law schools, on the other hand, are mostly publicly supported institutions. Law students, and taxpayers too, should have been able to trust that these institutions would act in accordance with their expressed educational mission by modeling, as well as teaching, professional values and responsibility. Instead, law schools have demonstrated that the professional values that they really embrace, in contrast to their highfalutin’ mission statements and their cynical classroom and commencement day yapping, are those of a con artist. 

38 comments:

  1. The vast majority of judges (especially at the appellate level) on the bench today went to law school 30+ years ago when attending even a regional school was affordable and a decent investment - long before the days of schools like Infilaw and similar fifth tier jokes. They can't fathom that their solemn, prestigious alma mater and schools like it would be distorting beyond recognition their employment stats.

    I also agree that the court is just hilariously wrong on its comparison of coin values and law school employment stats. You can go to any book store in America and buy a book on coin valuations. The only place you can get law school employment data is from the schools themselves.

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  2. WHat is going on here is a brazen injustice. This is merely a microcosm of what is happening nationally. Effectively, the rich and wealthy have begun to exempt themselves from the rules that they impose on the entire population.

    The real con takes place in convincing the population that liberalism is the solution. In fact, in order to secure total dominion, the control of government has to increase so that the imposition of different laws by class becomes a reality.

    A society with conservative and moderate principles can never prevent the inherent injustices with some aspects of inequality, but this sort of dramatic inequality under the color of law would be impossible. A rich business guy does no due diligence over the course of a decade long transaction and the result is a tortured decision aimed at getting him paid. In converse, kids rely on i) beliefs indoctrinated into them since birth, ii) institutions invested, UNDER THE LAW, with special privileges due to their allegedly benevolent motives, and iii) statistics, whose deceptive nature can only be uncovered if one assumes that those who promulgate them have the objective to deceive, are destroyed without recourse. I also forgot to mention that the instrument of said destruction is money diverted from the public to said institutions despite the catastrophic consequences. In effect, the rich are exempted from the rule of law and the poor and tax payer get fleeced.

    As I alluded to above though, the real con is liberalism. When the law is limited, and when the reach of law is limited, then the rich cannot use the government to impose the most draconian form of inequality, namely this: a vast labyrinth of laws and consequences apply to you, but not me. Oh, and by the way, I take your money to institute and make permanent this inequality. Liberals want bigger government and more regulations so that one set of rules can apply to the poor and middle class and another set for the rich and wealthy, and so that they Can tax the lower classes and give the tax to the upper classes, further buttressing the Inequality. in other words, feudalism.

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  3. As a "boomer", I disagree that the Courts are wrong. We old people are perfectly capable of figuring out what is going on today, and if I were a sitting Judge, I would expect the lawyers would fill me in will well pled briefs. But the fact is, it is a lot easier to assume somebody bought a coin based on a misrepresentation of its worth than that they sought a legal education based on a misrepresentation about employment prospects: (1) When I went to law school in the 80's, I heard even then . . . without the internet, how many lawyers there were and how difficult to get well paying jobs. (2) People likely attend law school for all sorts of reasons . . . they have nothing better to do, it is still (or was) prestigious, or maybe they even want to be lawyers. Most people who go to college or professional school today are hoping for the best for their futures but nobody is guaranteed anything. Certainly nobody is guaranteed they are going to be a success or make a lot of money and nobody in law school is guaranteed they are going to get a job as a lawyer. Still, 50% of graduates manage to do so. The Coin buyer however is misled about the value of his purchase. It is not amorphous or vague or dependent on factors that cannot be ascertained at the time of sale. The coin was either worth $200 or it was worth $100,000. If it was sold as worth $100,000 when only worth $200, because there was a violation of a trusted relationship, there is a cause of action. There is no trust relationship between a student and an educational institution, especially today when there is all sorts of information available. The school offers an education at a set price. The buyer decides to accept or not accept the offer. The school does not guarantee employment. It guarantees only the opportunity for employment. I don't see how the Courts could do anything different than they have. If they opened the door to the law schools . . why not pharmacy schools or undergraduate schools? Sometimes the Courts rule because there has to be a limit on what will be a viable cause of action. Foreseeability is one of those things. If it is foreseeable that a student is never going to get a job that will pay off the huge amount of debt he voluntarily assumed . . . well does he truly have a viable cause of action? I don't see it. So the Courts will massage these cases the best they can . . but they are not going to unleash these types of causes of action against the educational industrial complex. Its just not going to happen.

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    1. Sorry, I'm a boomer too but couldn't disagree more. Way back when in the 80s it was conventional wisdom that mediocre law students such as myself were going to have a hard time finding work. At no point, however, did my law school-or any law school that I was aware of-ever lie about my employment prospects in order to get me to attend. And that's what's going on-in many cases, the employment stats were "fudged" at best, presenting information which was factually inaccurate. It's still going on-this whole business of law school funded jobs to game the employment stats. When I was in law school, no law school anywhere routinely hired recent grads. At most there might be one hired to help in admissions, period. Now even schools you've heard of(that means you UVA) hired dozens(at UVA I think it was 59) to phoney-baloney "fellowships" which didn't exist in any form, anywhere, when I was in school.
      And to say the coin resale market is different reflects a lack of knowledge of how coins are valued. Whether a coin is "good" or "fine" may mean thousands of dollars. There are several grading companies, and while there is a general consensus, it's not precise.

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    2. To state that there is no trust relationship between a student and an educational institution is laughable. What if a law school published that all 100 of its graduates passed the bar when in actuality it was only 2. Paying $100,000 for a $200 coin seems sort of mild especially when information on coin values are not controlled by the one owing the fiduciary duty.

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    3. That is simply fraud or mistepresentation, not breach of a fiduciary duty. There is nothing any more special about a law school than a for profit diploma mill. It has no special relationship or fiduciary responsibility to its students. Until the courts say otherwise, laughable does not quite fit. They offer a product. You buy the proluct. They guarantee nothing. Even if they do misrepresent the employment prospects, the question is whether you can prove that is what induced you to go to law school. Since you still had the potential of getting a legal job, even out of coastal, the fraud is just about impossible to prove. The courts are right. Just because a person is a lemming does not mean he can hold the school responsible for being a lemming.

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    4. ^ Jack Marshall, how many times are you going to make this ridiculous argument? If this involved anything other than legal education, youd'be all over this scam on your stupid blog.

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    5. Amen, @6:59. I'm an 80's grad, too, and what you said hits the nail on the head. As far as I can recall, schools didn't even publish employment statistics back then. I picked places to which I applied on the basis of the GPA/LSAT stats, restricting myself to what are now T25's assuming, correctly in that era, that those were the places employers would look to first. It's one thing to hear on the street that there are too many lawyers and not enough jobs and plunge headfirst into a TTT anyway. It's quite another when a school publishes ginned up statistics to convince you that what you heard wasn't really true, at least not for its graduates. IMHO this all got started when USNWR started asking for jobs stats from schools for their rankings and soon life began to imitate art.

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    6. Mature, you don't agree with an opinion, so of course it just has to be written by someone you know and don't agree with.

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    7. "Since you still had the potential of getting a legal job, even out of coastal, the fraud is just about impossible to prove."

      This might be the most riduclous "argument" I've heard in favor of the law school scam. If I created a lottery and advertised 1/50 chances of winning but the chances were actually 1/50,000, would the fraud become "just about impossible to prove" because the victims still had a chance of wining said lottery? HFS you are a moron. Way to think like a lawyer!

      "The courts are right. Just because a person is a lemming does not mean he can hold the school responsible for being a lemming."

      I take that back. THIS is the most ridiculous "argument" I've heard in favor of the scam. The victims are so dumb that they simply can't be victimims!

      There will be a day of reckoning for your types.

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    8. "HFS you are a moron."

      Who's initials are HFS?

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    9. Google "HFS abbreviation." Sorry if that isn't mature enough. Do you have anything else to say?

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    10. "Do you have anything else to say?"

      Yes, you prolly should check the batteries on your jokosarcastometer; it appears to be tossing off false negatives.

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    11. Sorry about that, I figured you were a law school apologist. Godspeed.

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    12. No problem, neighbor, thanks for the reply and Godspeed to you, too.

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  4. I've collected coins. If you go to estate auctions of hardcore coin collectors - who always have more "melt value" coins that real "collectible" coins, and you wait until the end when all the hardcore collectors have blown their budgets, you can get "melt value" coins for 30% below melt value. You get a great lesson in economics as well....

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    1. Actually, the greatest of all lessons in economics: Nothing will ever be worth anything more or anything less than what someone is willing to give for it.

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  5. If there is a general meme in society that law school is a good idea, should law schools really be held accountable for misleading people into enrolling?

    Also, sure the law school presented statistics, but just how closely did the plaintiffs rely on the statistics? Did they ask to see the actual study? Ask how the law school sampled its graduates? How the law school conducted its surveys?

    I think the courts are getting these cases right. As holder of a worthless degree from a tier 2 school, I assume full responsibility for my crappy career decision, and other lemmings should do so as well.

    Still, I'm glad these lawsuits are happening, and I hope more people file them. It draws attention to the problem.

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    1. I tend to agree with 4:45. I don't believe that these plaintiffs would have stayed away from the Cooleys of the world if the truth had been written on the front of the building in neon lights. They were simply hellbent on going to law school, and nothing—not a quarter of a million in non-dischargeable debt, not their manifest unintelligence, not their abysmal LSAT scores, not the most baleful warning—would have deterred them.

      Law students are praised as a brilliant élite until they find themselves unemployable, whereupon they become innocent, helpless little lambs. Well, pooh.

      Old Guy

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  6. Legal realism. There is honestly no other answer to what has happened to the law school fraud suits.

    I have seen totally bogus, frivolous, and stupid claims make it past the pleading stage. Why? Because between unknown parties, judges are reluctant to deny anyone a fair chance to develop evidence and have a day in court. But you interject a Preftigious School of Law and instantly judges are interjecting their own experiences as evidence and taking the motions to dismiss as motions for summary judgment.

    Fish around and you will find all sorts of cases where evil small-time businessmen get nailed for consumer fraud, particularly under modern consumer fraud statutes. Debt collectors and telemarketers are watched like hawks over collecting 2k debts from penniless deadbeats. But a law school raping 100 kids of $100k each? That doesn't even make it to discovery.

    I'm not saying that they would have won a dime, but given the crap that regularly flies past a MTD for failure to state a claim in state courts, the idea that the law school scam attorneys can't even take a deposition is ludicrous. It's simply an example of undesirable facts making bad law because the judges want it that way.

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    1. Where do you get the idea that they aren't even allowed to take a deposition? Recently some cases made it to an appellate court, which took a great deal of trouble to write reasons even though the cases were plainly unmeritorious or at least incompetently argued. See my comments here:

      http://outsidethelawschoolscam.blogspot.ca/2014/09/illinois-appellate-court-affirms_27.html#comment-form

      The court indulged these people more than it should have—perhaps because they were graduates of law skule. Did the judges feel a duty to teach these people a little law?

      Old Guy

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    2. You seem to not understand the standard for a 2-615 motion.

      I'll start with damages, as that's an area where both courts were clearly out of step with other areas of law. Here's what the appellate court writes:

      "Plaintiffs sought to recover as damages: (1) the difference between what they paid intuition based on the alleged misrepresentations regarding jobs and salary data in the employment information for the 2005, 2007, and 2009 classes, and what they should have paid in tuition based on the "true" value of a DePaul degree." (Para. 57).

      This is a fairly traditional, straightforward concept of damages in a fraud case. Plaintiff purchased product X. Product X was grossly overvalued due the fraud of Defendant. Plaintiff can be made whole by receiving the difference between the inflated value and the actual value (absent misrepresentation) of the product.

      That's damages. But what does the Court write? "plaintiffs received exactly what they paid for (the J.D. degrees) and, thus, have failed to show any actual damages." Wait, what? They plead that they purchased a product for more than it was worth. You don't tell a fraud victim who purchased a car that "well, you got the car! it only gets 20 mpg instead of 40 mpg, but you got what you paid for!" Yet, that's exactly what they implied simply because they didn't believe there was a misrepresentation at issue (which is irrelevant to whether plaintiffs are damaged).

      The Court continues, "they failed to plead any reliable mechanism for calculating the "true" value of their law degrees because of the alleged misrepresentation." Since when do you have to prove a METHOD of calculating damages?! Calculating economic damages is the subject of expert testimony. If you had to plead the method of calculating damages, every antitrust, securities, and most fraud cases would be gone. The fact that the plaintiffs included some extraneous side damage claims doesn't change the fact that they plead they would calculated by subtracting true value from purchase value.

      "Finally, we also agree with the circuit court's apt determination, when cataloguing all the myriad factors (discussed above) impacting an attorney's lifetime earnings, that "[n]one of these factors can be determined with any kind of certainty and, therefore, the amount of damages, if any, sustained by [p]laintiffs is wholly speculative.""

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    3. (2 of 2)

      Here, the court has decided to play fact-finder on a 2-615 motion and decide preemptively that there's no way the plaintiffs can show fraud damages because there are other factors playing into attorney income. This is improper for a court to do, at least on a motion to dismiss for failure to state a claim. People are allow to preset complex damages claims to a jury.

      The entire opinion is replete with the court engaging in improper fact-finding. They decided proximate cause and decided reasonability of the misrepresentations. These aren't 2-615 issues. Heck, proximate cause is a straight-up jury issue. (Your comment keeps using the word "proof." Are you familiar with civil procedure?)

      If the court took issue with the previous employment statistics not being sufficient to be a pleaded misrepresentation, it should have simply dismissed and given leave to replead with instruction to shore up the language regarding the misrepresentations. For them to simply say there is no way these claims can go forward oversteps the line and clearly gets into fact-finding and closing the courthouse doors, which is a byproduct of legal realism.

      The crux of it comes down to paragraphs like this:

      "Plaintiffs' interpretation of this generalized employment statistic as including only full-time legal positions has been found to be unreasonable as a matter of law by courts in other jurisdictions which have considered the same issue"

      How in the heck can courts decide that as a matter of law? It defies legal principles, particularly when there are multiple plaintiffs across the country who all took the same "interpretation," particularly when the "interpretation" happens to be the one clearly desired by the publisher of the materials. It's possible a jury could say it's unreasonable to rely on such an interpretation (which is likely, to be honest), but, again, that's a jury issue, and not something I'm comfortable with courts dismissing on a 2-615 motion.

      -member of the Illinois bar.

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    4. If you have been litigating for as long as I have, this type of opinion is not at all unusual. Take a 1983 Action in Federal Court for policy abuse. Those judges routinely grant summary judgements in favor of the police when the facts are clearly in dispute. Its the way the system works. Cases are prejudged all of the time for viability or futility. Not saying it should work this way, but in reality that is the way it does work . . . and the court pretty much is dead on that the damages are speculative. No expert could reasonably opine on the same, though there are plenty who would take the money and attempt to do so. Perhaps the greatest injustice was when Scotus took the Bush v. Gore case and terminated the Florida recounts. But that is what courts do. Same on Appeal. In the end, it doesn't matter what errors were committed by the Judge below. If the appellate courts believe the result acceptable or fair . . . no reversal.

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    5. I'm not going to go over the issues again, especially with someone who is being snide. The case was hopeless on the pleadings, and I see no reason to grant leave to replead.

      Old Guy

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    6. 11:41 - Sadly, you're correct on how common they are. I find it sad that such things are accepted as good law.

      I disagree that an expert would be unable to calculate damages. Antitrust cases involve calculations far more complex than this all the time.

      Old Guy - In my opinion, we'll never know if these cases were truly hopeless because the plaintiffs were denied the opportunity to conduct full discovery. Hopeless cases can become very much hopeful with a document production and some key depositions.

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    7. 6:23, spot on. IMO, I feel that I have seen cases proceed forward on less, so it seems to me that what appears to be the converse situation is very frustrating.

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  7. I have received the following inquiry from an anonymous commenter at 9:08 PM: "Did you post this from [a] government computer?. . . The time stamp suggest so."

    I am sorry to disappoint, but I took the day off for a periodontist appt. As well, Blogger allows one to schedule posts in advance for automatic posting at a designated date and time. May I suggest, commenter at 9:08 PM, that you tend to your own little problem?

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    1. I praise this commenter for trying to root out government employees abusing government resources, of which I am sure there are no others on the government dole.

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    2. Willing to pony up $10 on an even bet that the anony 9:08 was posting from either a UChi or DSOL acct.... ...leaning toward UChi if there's any sort of double entendre suggested by the description of the problem as "little" and in the singular.

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    3. 11:32, I'd comfortably bet $1,000 that you're right. And I'd wager $1,000 that it's UChi.

      Perhaps he was here searching for poetry?

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    4. This is posted from a govt. issued device. You see, I am a librarian responsible for providing information and counseling to my patrons regarding undergraduate and graduate programs of study. I warn everyone who crosses my path to stay the hell away from all law schools and run like the wind away from increasingly desperate law professors and their lies.

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  8. "It was the best of scams; it was the worst of scams; it was the age of special snowflakeness, it was the epoch of belief in scamdean authority, it was the epoch of incredible lemming credulity, it was the season of Light, it was the season of Debt, 0L was the spring of hope, 3L was the winter of despair, we 0Ls had everything before us, we 3Ls had nothing before us, we 0Ls were all going direct to an upper middle class Heaven, we 3Ls were all going direct the other way – in a leaden handbasket of o'erweening debt... , the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only"

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    1. Thanks, d. Though Sir Charles did most of the work, of course.

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  9. "Rather, I note the Court’s statement that, during the relevant time, coin valuation was less readily available than accurate placement statistics for law grads.

    That's true, though. Back in the dark ages of 2005 or so, no one had anywhere to turn in order to valuate coins. Now that we have these here newfangled intertubes, however, it's become much easier.

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  10. " Who is typically more naive and vulnerable-- a 22 year-old recent college grad or a multi-millionaire businessman? Maybe the court believed, without quite saying, that the behavior of the coin dealer was more depraved than that of the law schools. "

    Dybbuk, turning serious for just a moment, there does indeed seem to be something worse than a double standard going on here.

    The judge in Marini seemed willing to extend to him (a millionaire businessman as you point out) a willingness to believe he must possess almost a childlike innocence or naivete.

    OTOH, gee, whiz, he's just a millionaire businessman, after all - not a law school grad.

    The judge is a law school grad. One for whom it obviously turned out well. Too many of us lawyers who end up doing well seriously misunderestimate (to borrow Presidential phraseology) how difficult it is for anyone who doesn't land that first job. We also seriously fail to account for the effects of the immense increases in debt load for the average LS grad.

    The plaintiffs in the law school fraud cases, though, after all - they're law school grads - just like the judge. He thinks HE would have been more sophisticated, therefore they should have been more sophisticated in their information gathering, as compared to someone who is merely a middle-aged, experienced, millionaire businessman.

    The willful blindness required to express such concepts, in public, out loud, and on the government record, is astonishing.

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  11. If civil fraud cases won't take, maybe we should consider pursuing criminal charges. Taking a different approach worked in the civil rights cases; it's worth at least investigating.

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