Student Defense has filed a new lawsuit against unaccredited, for-profit coding boot camp Lambda School (now called Bloom Institute of Technology). The suit alleges that the school misled students with false job placement numbers, operated illegally without approval from the California Bureau for Private Postsecondary Education (BPPE), and misrepresented practices around the financing of income-sharing agreements (ISAs).
The new case against Lambda was filed last month in California state court on behalf of former student Emily Bruner; it names the school’s CEO, Austen Allred, as a defendant in his personal capacity. It joins three earlier arbitration cases Student Defense has brought against Lambda.
We sat down with Student Defense co-founders Aaron Ament and Alex Elson to ask them about how this case stands out from other lawsuits they’ve brought against for-profit schools, and how they’re working to get justice for Lambda students.
Arnold Ventures
Why did you decide to take this case?
Alex Elson
After hearing from multiple students with complaints about Lambda, we conducted an investigation and determined, among other things, that the school appeared to be misrepresenting its job placement rates and operating — for years — without necessary approvals. In May 2021, we brought three arbitrations against the school to vindicate the rights of three particular students.
Aaron Ament
More generally, we’ve seen that the coding boot camp sector has been rife with abuse, luring students into predatory financial products with harmful terms. In this case, we allege that Lambda advertised a false job placement rate in order to get students to enroll and take out ISAs to attend the school. They also led students to believe that their incentives were perfectly aligned by promising students that the school only got paid if and when students obtained a job and got paid. But this too was false. On top of all of that, prior to August of 2020 Lambda was operating without the necessary approval from the California BPPE. Taken together, we thought it was important to step in and provide legal services to aggrieved students.
Arnold Ventures
How does this case differ from others you’ve taken in the past?
Alex Elson
The Bruner case is only the second time we have named an executive of a for-profit school in his or her personal capacity — we did it in our Dream Center litigation as well. This case is also unique because our client had the foresight to opt out of the arbitration clause that was buried in the fine print of her ISA. Because she took that step, she is able to bring the case in court rather than in arbitration.
Aaron Ament
This is one of the most high-profile cases brought against a coding boot camp. Although Lambda has not disclosed its valuation, its CEO, Austen Allred, confirmed it was more than $150 million in 2020, and had aspirations to expand to Europe and India.
Arnold Ventures
Do you see that this case could set a precedent, and if so, what?
Aaron Ament
Yes, these cases can set an important precedent for other Lambda students who were defrauded, and can serve as a reminder to all institutions that truth and honesty to the public — especially around terms of income-share agreements and figures as important as job placement rates — is paramount.
Alex Elson
The Lambda arbitrations also serve as a reminder to institutions that arbitration clauses and class action bans do not insulate them from liability. Students can and will file arbitrations — en masse if necessary — in order to vindicate their rights.
Arnold Ventures
Is it true that arbitration clauses and class action waivers often mean that students do not file claims?
Aaron Ament
Too often, arbitration clauses and class action waivers leave students without recourse. But there’s power in bringing multiple arbitrations together. If schools face pressure from multiple filings, it can become costly from a time and resources perspective to defend the separate proceedings. And the arbitration fees — which the business must pay — can add up. So perhaps these schools are starting to see that arbitration isn’t the shield that they thought it would be.
Arnold Ventures
What do you recommend the Education Department do to prevent this kind of fraud?
Aaron Ament
In this case, Lambda is not eligible for Title IV federal funds, meaning students cannot take out federal student loans or get Pell grants to attend. But there have been many Title IV-eligible institutions of higher education that have misrepresented job placement numbers — Corinthian College being the prime example. We haven’t seen any enforcement actions brought against schools for such misrepresentations since the Obama Administration, unfortunately. We’re hoping that it ramps up under the Biden administration. The Department of Education has enforcement jurisdiction to oversee a lot of issues similar that what we see here.
