Fudging their graduate employment statistics is more than an ethical matter for law schools — it’s a legal one, according to a paper written by recent University of California, Davis School of Law graduate Joel Murray.

Murray concluded in the paper posted on the Social Science Research Network site that presenting false or misleading employment data violates several consumer protection provisions of the Federal Trade Commission Act.

He’s not alone in believing that law schools are treading shaky legal ground. University of Wisconsin Law School professor and advertising law expert Gerald Thain agreed that the agency could take action against law schools that publish false or deceptive employment data.

Paul Campos, a professor at the University of Colorado School of Law who recently wrote an article for The New Republic highly critical of the law school job reporting system, agreed that law schools have opened themselves to litigation.

“I’m not an expert on consumer fraud, but I have looked at the general question of whether there is some potential for legal liability for law schools, and the answer is yes,” he said.

Law schools may well face litigation by disgruntled graduates in states with strong consumer protections laws, Campos said. That has already happened in California, where a 2008 graduate of Thomas Jefferson School of Law filed a class action against the school in May alleging that it committed fraud by misrepresenting the employment statistics for its recent graduates.

Law schools are likely to respond to that type of consumer fraud suit with two arguments, the first of which is that they have simply been following the American Bar Association’s reporting rules and are following the industry standard, Campos said. Second, law schools may argue that potential law students are sophisticated consumers with plenty of options.

“Another potential source of liability under federal statute is that schools are, essentially, lying to the federal government for the purposes of getting benefits of some sort,” Campos said. “Law schools get federal subsidies, most notably in the form of federally guaranteed loans, and that could open them up to litigation.”

Murray focused his research specifically on the Federal Trade Commission Act, and concluded that law schools are subject to that law. At the same time, he noted, applying the FTC Act to law schools would represent a significant expansion of the law’s scope, since it hasn’t been applied to institutions of higher education in the past.

“By reporting false or misleading employment statistics in marketing materials and to U.S. News & World Report, law schools violate the FTC Act’s prohibitions on deceptive practices and false advertising,” Murray wrote. “Prospective law students reasonably rely upon a law school’s employment statistics to choose whether to attend a law school, and consequently, reporting false or misleading employment statistics has a material effect on law students.”

Thain said that the FTC would have to closely examine any claims of false or misleading data on an individual basis. “Perhaps not all claims that an unhappy alum thought deceptive would prove so upon review, but some might,” he said.

Murray wrote that the FTC has applied the act to nonprofit organizations in the past. In any event, most law schools function much like for-profit business, competing for customers, he said.

“The FTC should begin an investigation into U.S. law schools,” he wrote. “Many law schools are violating the FTC Act by reporting false and misleading employment statistics. The FTC has jurisdiction over law schools because they are professional schools oriented towards preparing students for legal careers and therefore, provide pecuniary benefits to students.”

Thain cautioned that investigating law schools likely won’t be a top priority for the FTC, given the agency’s limited resources and the prevailing view of law students highly intelligent.

Contact Karen Sloan at ksloan@alm.com.