BAR-BRI

The N.Y. Times reports:

December 4, 2005
Are Lawyers Being Overbilled for Their Test Preparation?
By JONATHAN D. GLATER

Santa Monica, Calif.

MANY executives dream of dominating their industries the way BAR/BRI does the business of helping law school graduates prepare for bar examinations. Every law student knows BAR/BRI. Hundreds of thousands of them have taken its courses to pass the bar, an essential step in most states before a law school graduate can practice law. Some of the best law professors in the country teach segments of the company's courses, which are offered live in select locations and on videotape at others.

But now BAR/BRI could use a few lawyers itself. Some of the people who paid the fees, took the courses and passed the bar have turned on the company, which is owned by the Thomson Corporation of Stamford, Conn. Represented by an aggressive Los Angeles lawyer named Eliot G. Disner, they have filed a lawsuit charging that the company that helped them to become lawyers has operated an illegal monopoly and has overcharged hundreds of thousands of students by an average of $1,000 each - or, collectively, by hundreds of millions of dollars.

In complaints filed in the spring and summer, different groups of students charged that BAR/BRI has paid competitors to shut down and negotiated illegal agreements with potential competitors to divide the market. In particular, they cite a 2003 agreement with Louisiana State University, which until 2004 operated its own bar review course; under the deal, BAR/BRI promised to pay tens of thousands of dollars each year to the school, and the school promised not to run a competing bar review course.

Lawyers for BAR/BRI deny that the company violated any provision of the antitrust laws and say they plan to contest the charges vigorously. "We believe the allegations have absolutely no merit," said Steven F. Molo, a partner at Shearman & Sterling who is representing BAR/BRI.

The lawsuit is in its very early stages and it is difficult to evaluate the claims fully before all the evidence is available. But much is at stake. Every year, between 35,000 and 40,000 people graduate from the nearly 200 law schools approved by the American Bar Association, and many take a BAR/BRI review course. In New York alone, according to the company's Web site, "more bar candidates trusted BAR/BRI to prepare them for the New York bar exam than all other bar courses combined."

The course is not cheap: next summer's eight-week review for the New York bar exam given in July costs more than $2,600. Given the relatively low costs of providing the courses - while some students attend live lectures, many gather in hotel conference rooms and simply watch videotapes of professors, meaning BAR/BRI's cost is primarily the hotel room, television set and VCR - it is clear that BAR/BRI's business is highly lucrative. Thomson does not break out BAR/BRI's contribution to its revenue or profits, but Stanley D. Chess, a former top executive at BAR/BRI who left to join a short-lived competitor, said: "Bar review is a very profitable business."

BAR/BRI has a long history. According to court documents, Richard J. Conviser, chairman of the company, helped found the Bar Review Institute in 1967 in Illinois. Seven years later, Harcourt Brace Jovanovich acquired B.R.I. and a California bar review course, Bay Area Review, and merged the two to create BAR/BRI.

The combined entity at that time offered courses in dozens of states; now it offers courses to prepare for the bar exams of all 50 states. The company's business model is simple. BAR/BRI advertises its bar review course heavily at law schools and hires law students to serve as its on-campus representatives (they pay no or reduced tuition for the course and have sometimes received cash bonuses). Students who sign up in their first year of law school pay less than students who sign up later, and the sooner a student puts down a deposit, the sooner that student locks in the final cost of tuition.

It is hard to overstate the anxiety the bar exam provokes. Over all, it can take more than 12 hours over two days. The multistate portion of the exam is required by nearly every state and is the same in those states; it consists of 200 multiple-choice questions. Each state's exam, typically the second day, usually consists of essays and multiple-choice questions that focus on the law in that particular state. The kinds of questions often require knowledge of topics that some students might not have learned about in school, adding to the allure of a review course aimed precisely at the topics on the exam.

YOU absolutely have to take a bar review course to pass the bar," said Lisa M. Gintz, who is one of the plaintiffs in the lawsuit and is now practicing family law in Baton Rouge, La. She graduated from Louisiana State University's Paul M. Hebert Law Center in 2004 and had to take out an additional "bar loan," which was added to the more than $100,000 in student loans she already carried, to help pay the $858 cost of BAR/BRI's course in Louisiana. Ms. Gintz said she had felt great pressure to pass the bar exam, and not just because of the cost: some employers retract job offers and even fire law school graduates they have already hired if they do not pass, she said. "If you don't pass," she said, "you're gone."

BAR/BRI benefits from students' anxiety. In a letter on the company's Web site, Mr. Conviser writes, "When you are ready to tackle the ultimate final exam, your bar exam, BAR/BRI will be there for you with the nation's most experienced, most personalized and most up-to-date bar review course."

Mr. Conviser, through BAR/BRI's lawyers, declined to comment for this article. Mr. Disner and the other lawyers who have filed antitrust lawsuits against BAR/BRI this year hope to depose Mr. Conviser later this month.

This is not Mr. Disner's first run at BAR/BRI. An enthusiastic talker with wavy white hair and a breezy delivery, he filed an antitrust lawsuit against the company once before, in May 1992. He represented American Professional Testing Service Inc., which offered a bar review course in California, Arizona, Nevada and Florida, and had plans to expand into other states.

American accused BAR/BRI, then owned by Harcourt Brace Jovanovich, of mounting a "campaign to forestall competition" by flooding law school campuses with fliers that suggested American was implicated in a federal securities investigation, according to court documents. (The federal investigation forced American's parent company into Chapter 11 bankruptcy proceedings in 1991.)

A federal appellate court described American's accusations this way: "American claims Harcourt offered its courses at below-cost prices, provided gratuities to law school administrators to obtain preferential treatment, and ripped down American's advertising materials. American also maintains that Harcourt's alleged predatory hiring of American Professor Robert Jarvis, who also taught at BAR/BRI, 'crippled American's effort to compete in the Florida market.' "

At the end of a trial - in which Mr. Disner had no involvement, for he was out of the case by then - a federal jury was persuaded by American's argument, but the presiding judge overruled the decision. In 1997, three years after the trial, an appellate court upheld the decision in BAR/BRI's favor, and through the 1990's, BAR/BRI continued to consolidate its market position.

BAR/BRI has not always been so lucky in court. The Supreme Court found in 1990 that an agreement between BAR/BRI and a Georgia bar review provider did violate antitrust laws. The Georgia review had agreed to operate only in Georgia, to use BAR/BRI materials and to pay BAR/BRI a fee while BAR/BRI agreed to stay out of the state.

In 1994, executives at another enterprise, the West Publishing Company, decided to enter the bar review market. In January 1995 they recruited Mr. Chess, who had worked at BAR/BRI for more than 20 years, to help them. Mr. Chess was willing to leave in part because his base salary had been cut by $250,000 after the General Cinema Corporation acquired BAR/BRI's parent, Harcourt Brace Jovanovich, in 1991.

(After Mr. Chess left BAR/BRI, it sued him, charging that he had committed fraud and breached his fiduciary duty to BAR/BRI by negotiating with West to enable it to enter the bar review market and by luring other BAR/BRI employees to join him. Mr. Chess said the suit eventually was settled.)

West Bar Review offered its first courses in the summer of 1995, Mr. Chess said. Its on-campus marketing strategy echoed BAR/BRI's: hire student representatives, give incentives for students to put down deposits on review courses they would take years later, hire cogent professors to teach live in some locations and via videotape presentations at others.

"The mandate was to take it across the country, open up operations, get market share and ultimately make a profit," said Mr. Chess, who now runs more than 100 law-related Web sites, including lawschool.com, an information source for students and professors; and chesslaw.com, a free legal research site. "We bought courses, which helped us grow," he said, "and we opened up a lot of states."

In 1996, Thomson, which did not yet own BAR/BRI, bought West. A year later, West's (now Thomson's) fledgling bar review program enrolled more students than BAR/BRI did in at least three states, Mr. Chess said, but it was not profitable and the new owners decided to get rid of it. The Washington Post Company, which owns Kaplan Inc., a large education services company, was "really eager to buy," Mr. Chess said, and at one point West Bar Review sent its employees an e-mail message announcing an agreement to sell the bar review to Kaplan.

Although Mr. Chess had already left West, in anticipation of the shutdown of the bar review program, he said he worked late on a Friday in August 1997 to help draft a statement announcing the sale. Over the weekend, however, the deal fell apart.

What happened over that weekend may be critical to the current lawsuit against BAR/BRI. Mr. Disner's complaint charges that over the second weekend of August 1997, Kaplan and BAR/BRI reached a deal: Kaplan would scrap its plan to buy the West Bar Review and compete with BAR/BRI if BAR/BRI would agree to stop competing with Kaplan in preparing college graduates for the Law School Admission Test. According to the complaint, which names Kaplan as a defendant, BAR/BRI also agreed to pay Kaplan at least $500,000 a year.

There is no dispute that Kaplan did not acquire West Bar Review. Kaplan and BAR/BRI announced a partnership agreement a few months later, to provide courses to help prepare college students for law school. In a statement, Dick Riley, a spokesman for Kaplan, said, "Kaplan's only agreement with BAR/BRI is to market BAR/BRI material to Kaplan students. Such agreements are commonplace and perfectly proper."

If documents obtained from BAR/BRI or Kaplan show that there was also an agreement between the two that divided up markets, Mr. Disner said he expected to win his case automatically. "This is a per se case," he said, grinning expansively as he contemplated the prospect earlier this fall. "If we prove this agreement happened, then we win."

Mr. Disner said he had learned about a deal between Kaplan and BAR/BRI from a person he would not name, and immediately began studying how to build an antitrust case. "It's unfinished business for me," he said, adding that he had thought often about the earlier, ultimately unsuccessful case against BAR/BRI and craved a rematch. "I was determined to finish the job."

But to pursue the case, he realized that he would have to leave the law firm where he worked, Manatt Phelps & Phillips, because partners there were uncomfortable with taking the side of plaintiffs in a class action lawsuit, he said. He left in May 2004 and began to assemble a group of lawyers who had taken BAR/BRI courses and who could be his lead plaintiffs. That October, he joined Van Etten Suzumoto & Becket, a law firm that explicitly agreed to let him go after BAR/BRI, and he is running the case from the firm's offices in Santa Monica.

BAR/BRI has a better market position now than it did when Mr. Disner went after it in the early 1990's. That is largely because Thomson shut down its West Bar Review program - which, remember, had been built by buying several independent review programs that competed with BAR/BRI - and turned over its students to BAR/BRI.

Thomson acquired BAR/BRI and several other businesses in 2001 from another company that had bought Harcourt. The new owner of Harcourt was Thomson's archrival in the information and publishing industries - Reed Elsevier, the parent of LexisNexis, which competes with Thomson's legal research unit, Westlaw.

For Mr. Disner, reassuring young lawyers interested in serving as plaintiffs in the suit against BAR/BRI was not easy. Many worried that bringing a lawsuit would hurt their careers in law firms that generally defended, rather than sued, big companies. Some lawyers had not yet passed the bar. But after two agreed to participate, last April, he filed his lawsuit, causing a small wave of publicity in the legal community. That attracted the attention of others angry at BAR/BRI.

Loredana Nesci, who received a law degree from Quinnipiac University in 2002 and now practices in Los Angeles, read of the lawsuit, called Mr. Disner and joined it. "My initial reaction was, 'Well, I knew that was going to come one day,' " she said, adding that she then wanted to get involved. "I know that there are so many kids out there struggling and I wanted to be at the forefront."

Another law school graduate who read about Mr. Disner's lawsuit told him about an agreement BAR/BRI had reached with Louisiana State University that Mr. Disner thought was also an antitrust violation. He revised the complaint and included the newer agreement.

In 2003, BAR/BRI and L.S.U. agreed that BAR/BRI would provide a bar review course in place of one that L.S.U. offered. BAR/BRI promised to pay L.S.U. $100,000 over a three-year term, as well as $20,000 annually for use of L.S.U.'s facilities. BAR/BRI agreed to charge discounted tuition of between $545 and $645 to L.S.U. law students who had signed up for the school's bar review course. But for new review students, tuition was set to rise to $1,095 in the first year, $1,195 in the second year and $1,295 in the third year.

The agreement also contained this provision: "L.S.U. Law Center agrees that it shall not, without the prior consent of BAR/BRI, undertake for itself or engage any third party to manage or administer any course that could be competitive with BAR/BRI."

THERE is a potential antitrust violation any time a deal divides a market or establishes that two companies will not compete with each other, said Thomas D. Morgan, a professor who teaches antitrust law at George Washington University Law School.

"But if you buy out an existing firm, you can require that the owners of the preexisting firm" not compete, and such a restriction need not violate the antitrust laws, he said. He added, however, that "you can claim that in doing that, they've created a monopoly."

Under antitrust laws, plaintiffs who bring a successful antitrust case may be entitled to three times damages plus legal fees. In the case against BAR/BRI, that could mean $900 million in damages, according to the complaint. Of course, there is a long and uncertain road the plaintiffs must travel before the litigation could lead to such a result.

John J. Costonis, the chancellor of the L.S.U. law center, said the deal with BAR/BRI made sense. Before he arrived at the school in 1998, he said, "The student bar association at the law school in past years had offered a bar review course and frankly it wasn't very good."

He said he tried to overhaul and improve the program, but his efforts rested heavily on the ability to attract students in New Orleans in addition to those at L.S.U.'s campus in Baton Rouge. When few students enrolled, he said it quickly became clear the program was not viable.

Mr. Costonis, who said that as a practicing lawyer he had gotten to know executives at BAR/BRI, called the company to see if they could work out a deal. Raising the percentage of students who pass the bar was a top priority, he added. "My concern was reasonable price and best quality," Mr. Costonis said, adding that the agreement had a three-year term so that if the bar passage rate did not improve, then L.S.U. could get out of the arrangement.

The move did not go over well with students, said Ms. Gintz, the L.S.U. law graduate. "They kind of just announced it to us all of a sudden: 'L.S.U. is no longer going to have a bar review, all you guys are going to have to take BAR/BRI,' " she said. "There was a huge uprising among the students."

Two other antitrust lawsuits have also been filed against BAR/BRI this year; one is now consolidated with Mr. Disner's suit before Judge Manuel L. Real in Federal District Court in Los Angeles. That combined case seeks class-action status on behalf of about 300,000 law school graduates who took BAR/BRI courses between 1997 and 2004. Judge Real, who has denied BAR/BRI's efforts to shift the case to New York, has scheduled a trial to begin in June.