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Do or should universities have fiduciary obligations toward their students?


Scott has already pointed out that Lisa McElroy seems to be arguing for the vigorous application of the doctrine of caveat emptor to transactions between prospective law students and law schools. Caveat emptor is a common law legal doctrine which asserts that the only duty sellers have to buyers is not to engage in affirmative misrepresentation, or fraudulent concealment of latent defects. Example: if you’re selling a house with a roof that leaks, you can’t lie if a prospective buyer asks you if the roof leaks, but if the buyer doesn’t ask, and you don’t do something to cover up the leak from discovery by a prudent inspection, then you have no liability to the buyer after the closing in regard to the condition of the roof.

Caveat emptor is (or was) applied traditionally to so-called “arm’s length” business transactions, in which the parties had no special duties toward each other.

At the other end of the spectrum, in law-talking terms, we have the fiduciary relationship, which is a catch-all term for situations in which parties to a transaction do have such duties, legally speaking. For example, if I have a great idea for a book and tell my friend, I have no legal recourse if my friend goes off and writes a book based on that idea (Legally speaking, I have no proprietary right in an idea for a book unless and until I actually turn it into a copyrightable entity, that is, an actual book). On the other hand, if I tell my agent this great idea and he turns around and pitches it to another one of his clients, Famous Author, who then writes up a proposal that the agent sells to a publisher, I can sue my agent for breaching his fiduciary duty to me, since we’re in a special legal relationship, i.e., one of agent and principal.

Note that the legalities of this situation don’t track most peoples’ sense of the moral obligations of the parties: Morally speaking, my friend’s betrayal of our friendship is worse than my agent’s breach of his legal duty to me, even though it’s not legally actionable (in part because I actually have legal recourse against the agent, but primarily because breaching obligations created by a business relationship is generally not as deplorable as betraying a friend).

So when we ask if schools have fiduciary obligations toward their students, we can be asking a narrowly legal question (“is a school a legal fiduciary in relation to the interest of its students?”), or a broader moral one (“is adopting the doctrine of caveat emptor a morally dubious or bankrupt thing to do in this particular social context, without regard to the legalities of the matter?”).

Although I’m no expert on the question, a cursory investigation suggests that there’s surprisingly — surprising to me that is –little formal legal support for the the claim that universities have fiduciary obligations toward their students, even though universities are usually organized as non-profit, quasi-charitable entities, that get all sorts of tax breaks and other benefits for being “eleemosynary” (law talk for public-regarding) institutions.

That of course is or should be to be a separate question from the question of how universities, colleges, law schools etc., ought to behave toward their students, regardless of the formal legalities. (Obviously the two are related, however. If law schools, for example, are taking the view that the only thing that matters in this world is to get someone to sign on the loan document line that is dotted, it becomes hard to see why they should be tax-exempt entities, why graduates should give them money after they’ve graduated, or why, for that matter, they should be viewed as more exalted social entities than car dealerships).

Anyway I do think educators in particular ought to consider themselves to have special obligations to their students, going beyond those created by a normal business transaction, for at least a couple of reasons:

(1) Generally speaking, students are young and naive, while teachers are older, and, if not wiser, at least warier. This obviously applies to traditional undergraduates, but it’s also true for a large percentage of law students, who are only formally adults, and — this is crucial — who have been brought up to think of institutions of higher learning as places that are doing something other than trying to figure out how to pass out the Glengarry leads to their best earners.

All of us are prone to optimism bias, confirmation bias, and the sunk cost fallacy, but, again generally speaking, the younger we are the more vulnerable we remain to these factors, which, because of the special cultural prestige institutions of higher learning possess, such institutions are especially able to exploit, should they choose to do so. That potential for exploitation means we can’t or shouldn’t always be closing, no matter how profitable it may be for the non-profit entities in which we operate for us to take this view of our present and future students.

(2) The entire economic justification (there are of course other justifications, but here we’re speaking of the dollars and the cents) for the considerable present costs of higher education is what economists refer to as “enhancing human capital.” We’re not just supposed to be providing a social signaling mechanism regarding the preexisting abilities of our students, which could obviously be provided at a vastly lower cost: we’re supposed to be enhancing those abilities from what they would otherwise be.

Law schools in particular like to plume themselves on the idea that we’re imbuing all sorts of valuable critical thinking skills to our charges. The irony here is that, if we’re actually performing this function at all effectively (assume the necessary can openers for the purposes of argument), we cannot at the same time adopt caveat emptor as the appropriate attitude toward our students, even as a practical — let alone an ethical — matter.

Consider what it means, practically speaking, for a professor at an extremely expensive law school with terrible employment statistics to actually “enhance” the human capital that funds her paycheck. To put it bluntly, if a law professor at Drexel is doing her job, in terms of what the legal academy advertises that job to be, she is in many cases transforming her students into people who will come to understand that the doctrine of caveat emptor, as applied to law schools, has produced an institution in which they would never have enrolled in the first place, if their critical thinking skills had already been improved.

In other words, a law professor at a school like Drexel who successfully educates her students is performing the economic equivalent of mailing herself a letter bomb.

. . . MacK from comments on the special obligations of legal academics: (I should have noted in the original post that the lawyer-client relationship is the epitome of a fiduciary situation):

It would be helpful to point out that law schools exist in a special category – perhaps one to a degree also inhabited by medical schools – the law and regulation of lawyers specifically provided that lawyers have a very high level of fiduciary duty towards their clients and indeed certain third parties (as officers of the court for example.) Every law school has a mandatory course in legal ethics. Moreover, lawyers are covered by extraordinarily strict conflict of interest laws especially when it comes to handling and investing client money.

Yet, here you have organisations essentially of lawyers (most law professors are still legally trained and qualified) with what are effectively their clients – in the form of their students – and the administration of those law schools, and numerous professors ranging from the egregious Ms. McEvoy to the much more egregious Brian Leiter insisting that they should be allowed to behave in ways that would make a used car salesman – or indeed a pimp blush – and for the former would probably violate all sorts of consumer protection laws and consumer credit laws. You have deans of law schools engaging in chicanery vis-à-vis their students that would get a lawyer disbarred – and the state bars are not investigating? The ABA is silent – the very institution that required legal ethics courses for law students?

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