No Spill-Over Prestige: Third Circuit Clarifies Article III Standing in Rankings-Fraud Suits – Comment on Budet v. Rutgers Business School (3d Cir. 2025)

1. Introduction

In Budet v. Rutgers Business School, the United States Court of Appeals for the Third Circuit confronted an increasingly common scenario: a putative class action alleging that a university’s manipulation of employment data fraudulently boosted its rankings and thereby induced students to enroll. While the court acknowledged that “rankings fraud is serious,” it ultimately held that the named plaintiff, Lorenzo Budet, lacked Article III standing because he failed to plead a concrete, particularized, and traceable injury. The decision clarifies the limits of standing in higher-education rankings-fraud cases and erects a new doctrinal signpost: prestige arising from a misrepresented program does not automatically “spill over” to other programs for standing purposes.

The case pits Budet—holder of an online MBA certificate and a master’s degree in supply-chain management from Rutgers Business School—against Rutgers University, which allegedly reported six school-funded positions as graduate employment to inflate its full-time MBA ranking. Budet sought to represent a class of non-MBA Rutgers business students, claiming he overpaid because of the deception. The District Court dismissed for lack of standing; the Third Circuit affirmed, with a dissent from Judge Phipps.

2. Summary of the Judgment

Holding. Budet lacks Article III standing. He failed to plausibly plead (i) that the alleged misrepresentation affected the full-time MBA program’s ranking, and (ii) that any purported ranking inflation spilled over to the programs in which he enrolled.
Disposition. Affirmance of the District Court’s dismissal; modification so that the dismissal is without prejudice, recognizing the jurisdictional nature of the defect.
Key Doctrinal Point (“New Rule”). A plaintiff who attended a different academic program than the one allegedly misrepresented cannot rely on a presumed “institution-wide prestige spill-over” to establish injury in fact; concrete allegations linking the specific misrepresentation to the plaintiff’s program and economic loss are required.

3. Analysis

3.1 Precedents Cited and Their Influence

Ashcroft v. Iqbal, 556 U.S. 662 (2009) – cited for the requirement that allegations be “plausible,” not “threadbare.” The court leveraged Iqbal to dismiss speculative ranking-impact allegations.
Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998) – cornerstone for the “fairly traceable” causation element of standing.
Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) – reiterated that a concrete and particularized injury is indispensable.
Finkelman v. NFL, 877 F.3d 504 (3d Cir. 2017) – Third Circuit precedent requiring “basic economic logic” or facts to support economic injury claims; heavily relied upon in the majority opinion.
United States v. Porat, 76 F.4th 213 (3d Cir. 2023) – the court distinguished Porat (criminal wire-fraud context) because there, the ranking demonstrably rose and then collapsed; Rutgers’s ranking allegedly remained stable.
Thorne v. Pep Boys, 980 F.3d 879 (3d Cir. 2020) – for the procedural point that dismissals for lack of standing must be without prejudice.

3.2 The Court’s Legal Reasoning

Pleadings vs. Inference. The complaint alleged ranking manipulation in 2018, but offered no factual matter showing that the ranking fell once the fraud was exposed. Without a demonstrable decline, the causal chain between misrepresentation and economic injury was deemed speculative.
Program-Specificity Requirement. Because the fraud involved full-time MBA employment statistics, the Court required facts demonstrating how that misrepresentation affected the online certificate and supply-chain master’s program. Merely asserting an “aura of prestige” was insufficient.
Abandoned Theories. At oral argument, counsel abandoned alternative standing theories (e.g., “cheaper school” or “inflated tuition” theories), leaving the court to analyze only the spill-over prestige claim.
Rule 12(b)(1) Standard. Treating standing as jurisdictional, the court accepted the complaint’s factual allegations but required plausibility under Iqbal/Twombly.
Relief Without Prejudice. Because the defect was jurisdictional rather than merits-based, dismissal had to be without prejudice, preserving the possibility of re-filing should facts emerge to establish standing.

3.3 Impact of the Decision

Higher Bar for Rankings-Fraud Plaintiffs. Students in programs uninvolved in the alleged misreporting must now plead program-level or institution-wide data showing economic injury, not merely reputational disappointment.
“Spill-Over Prestige” Disallowed Absent Facts. The decision curtails the intuitive but previously untested argument that a flagship program’s ranking automatically benefits every subdivision of a university.
Practical Effects on Class Actions. Plaintiffs’ counsel in education-fraud class actions must conduct deeper pre-suit investigation—e.g., expert analyses linking rankings movement to tuition or application trends—lest their complaints be dismissed at the pleadings stage.
Jurisdictional Clarity. Reinforces that federal courts must dismiss without prejudice when standing is lacking, preserving judicial resources and future access to courts.
Foreshadowing Circuit Splits. Judge Phipps’s historical-standing dissent—arguing that common-law claims recognized at the Founding bypass the modern tripartite test—sets the stage for potential Supreme Court review of the relationship between “traditional” and “modern” standing tests.

4. Complex Concepts Simplified

Article III Standing: The constitutional requirement that a plaintiff show (1) a concrete, particularized injury in fact; (2) a causal connection to the defendant’s conduct; and (3) likelihood that the injury will be redressed by a favorable decision.
Pleadings Standard (Iqbal/Twombly): Allegations must be plausible, not just possible, and must contain factual matter—not mere conclusions—supporting each element of the claim.
Benefit-of-the-Bargain Theory: A damages theory asserting that a plaintiff paid for something of lesser value than promised; standing requires showing that the item’s market value is indeed lower.
Without Prejudice vs. With Prejudice: A dismissal without prejudice means the plaintiff may re-file after curing defects; a dismissal with prejudice is final and bars re-litigation.
Traditional vs. Modern Standing Tests (Judge Phipps’s Dissent): The traditional view holds that historical common-law causes of action automatically satisfy Article III, while the modern test (injury, causation, redressability) applies to newer statutory or public-law claims. The dissent argues the traditional test still controls for breach-of-contract and unjust-enrichment claims.

5. Conclusion

Budet v. Rutgers Business School crystallizes a critical limitation on rankings-fraud litigation: a plaintiff must trace the alleged deception specifically to his own program and economic loss. Prestige does not automatically diffuse across a university’s offerings for standing purposes. The majority reinforces the orthodox, modern tripartite standing test, while the dissent invites a historical re-examination of standing doctrine. Going forward, litigants in educational fraud suits face a heavier evidentiary burden at the pleading stage, and district courts within the Third Circuit have clear guidance on dismissing such cases without prejudice when standing is absent.