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Lawsuit accuses Lambda School of misleading student about instruction, prospects
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Lawsuit accuses Lambda School of misleading student about instruction, prospects 

A lawsuit filed Friday alleges a San Francisco for-profit coding academy and its founder deceived a former student into signing up and agreeing to pay them a share of her future earnings with false promises about training and job placement rates that left her with a pile of debt but no marketable skills.

The case filed in San Francisco Superior Court against Bloom Institute of Technology, formerly Lambda School, is different from previous actions brought in private arbitration against the company in two key ways. Company CEO Austen Allred is named as a defendant, and as a case filed in public courts, it could shed more light on the company’s financial agreements with students and investors.

Filed on behalf of former student Emily Bruner, the complaint alleges she was convinced to enroll by Allred’s Twitter feed, which touted high job placement rates after graduation with big-name tech companies. Instead of being taught marketable coding skills, the instruction was sub par, and employers rejected her from web development jobs after graduation for having insufficient coding skills, the suit alleged. The filing also said the company was in the midst of a fight with state regulators over its licensing as a school, and because of that the terms of the contract Bruner signed are not legally enforceable.

In an emailed statement to The Chronicle last year, regarding the cases filed in arbitration, the company said it had received a citation notice from state regulators in March 2019, but contested it, paid a fine, and eventually received approval to operate.

In a report on its 2020 outcomes the company claimed most people enrolled in its courses graduated and more than 70% of those that graduated that year found jobs in their field.

As part of her enrollment Bruner signed a document called an Income Sharing Agreement, or ISA, that required her to repay the school for her courses once she got a job in tech paying more than $50,000 per year, at a rate of 17% of her salary for 24 months capped at $30,000, according to the complaint.

Bruner opted out of the binding arbitration clause in the contract she signed when enrolling with the company, allowing the case to be brought in state court.

“I feel like Lambda misled me and my classmates at every turn — about their job placement rates and about how they would prepare us for jobs in the field. I was even more shocked when I found out they were operating illegally,” Bruner said in a statement. “I took time away from my young son and other career opportunities to participate in a program based on lies. While I’m thankful I opted out of arbitration so I can have my day in court, I wish my classmates who were also misled could be here with me.”

The company did respond to an emailed request for comment or a request for an interview with Allred by deadline.

Allred has in the past stood by the company’s representation of its job placement rates, calling previously reported 50% placement rates “technically accurate” but adding the figure was a percent of enrolled students that were hired, instead of the total percent of hired graduates.

Bruner’s attorneys argue that because the then-named Lambda School was not licensed by the California Bureau for Private Postsecondary Education to operate when she enrolled, she can’t be made to pay back her debt and the agreement is voided.

Through this case Ms. Bruner will be entitled to document discovery” said Alex Elson, vice president and co-founder of the nonprofit National Student Legal Defense Network and one of Bruner’s attorneys. “We simply hope to learn the truth about Lambda’s job placement rates, what it knew, and what its executive knew.”

Elson said Allred was named personally in the complaint because “Students won’t be protected until the executives that run predatory institutions realize they have skin in the game and are ultimately held accountable.”

The company also promised Bruner and other students that, “We don’t get paid until you do,” but was actually selling the rights to future ISA revenues to investors through a digital marketplace called Edly to generate cash up front, according to the complaint.

The company also changed its name last year from Lambda School to Bloom Institute of Technology.

As part of the change the company said it would offer different types of payment plans, including a plan where students who aren’t making $50,000 annually a year after graduating are paid back back their money plus a 10% premium. Another “Outcomes-Based Loan” offers a no money down model with the same offer to refund tuition if a person can’t find a job and hits benchmarks for applications and networking.

The three cases brought last year in arbitration on behalf of three former students and which contain similar allegations are ongoing.

In one of the cases, filed on behalf of Linh Nguyen, an arbitrator denied the company’s motion to dismiss the case

Asked if he was confident those cases would resolve favorably for his clients, Elson said, “Yes.”

Chase DiFeliciantonio is a San Francisco Chronicle staff writer. Email: chase.difeliciantonio@sfchronicle.com Twitter: @ChaseDiFelice

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