Educ. Testing Serv. v. Stanley H. Kaplan, Educ. Ctr., Ltd.

965 F. Supp. 731, 43 U.S.P.Q. 2d (BNA) 1566, 1997 U.S. Dist. LEXIS 8255, 1997 WL 314914
CourtDistrict Court, D. Maryland
DecidedJune 2, 1997
DocketCivil JFM-94-3644
StatusPublished
Cited by9 cases

This text of 965 F. Supp. 731 (Educ. Testing Serv. v. Stanley H. Kaplan, Educ. Ctr., Ltd.) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Educ. Testing Serv. v. Stanley H. Kaplan, Educ. Ctr., Ltd., 965 F. Supp. 731, 43 U.S.P.Q. 2d (BNA) 1566, 1997 U.S. Dist. LEXIS 8255, 1997 WL 314914 (D. Md. 1997).

Opinion

OPINION

MOTZ, Chief Judge.

During the second half of 1994, twenty-two employees of Stanley H. Kaplan Educational Center, Ltd. (“Kaplan”) took a computerized version of the Graduate Record Examination (“GRE”), known as the GRE-CAT, given by the Educational Testing Service (“ETS”). Through this organized effort Kaplan proved that questions on the GRE-CAT reappeared with sufficient frequency that they could be memorized by test-takers and passed on to others who had not yet taken the examination. Kaplan brought its findings to ETS’ attention, and in response ETS took steps to cure the security problem that Kaplan had identified.

ETS was initially appreciative of what Kaplan had done. However, within a matter of weeks, apparently having become upset by what it perceived as Kaplan’s deceitful methods of investigation, unseemly motives and public (and less than honest) boastfulness, ETS filed this lawsuit. 1 Discovery has been completed, and the parties have now filed cross-motions for summary judgment.

I.

A.

For over fifty years ETS has prepared and administered a variety of standardized exams, including the GRE, the Scholastic Assessment Test, the Test of English as a Foreign Language, the Graduate Management Admissions Test, and the Advanced Placement Exams. Traditionally, these tests were given in pencil and paper format. In 1992 ETS began to offer the GRE in a computerized version known as the GRE-CBT. This version was, in effect, the traditional pencil and paper test on a computer.

In November 1993 ETS began to give the GRE-CAT. The GRE-CAT differs from the GRE-CBT in that it uses an adaptive software program to present new questions to the test-taker based upon her answers to the previous questions. The more successful the test-taker is in answering successive questions, the more difficult the following questions become. The final score is determined not simply by the number of questions answered correctly, but also by the relative difficulty of the questions. Because of the manner in which the test is structured, it is approximately only one-half as long as the traditional pencil and paper test.

One of the perceived advantages of the GRE-CAT was that it would not have to be given on a set day, as required for pencil and paper tests, but at any time chosen by the examinee. This was so because conceptually no two test-takers would be given the same exam. The reality of this concept depended upon there being a sufficiently large pool of questions and a sufficiently sophisticated software program to assure that the same questions did not regularly reappear. Since it was contemplated that the GRE-CAT would be given on a continuous basis, achievement of this reality was obviously problematical and there were those within ETS who were concerned about the security of the test during the time that it was being placed upon the market.

In the summer of 1994 ETS announced that in February 1995 it would not be giving the GRE in pencil and paper format as it usually did in February of each year. This meant that those who wanted to take the exam in that format would have to do so in December 1994 or in April 1995. Otherwise, they would have to be prepared for the GRE-CAT.

B.

Stanley Kaplan started the test preparation firm which now bears his name in 1938 in his family’s basement. Kaplan is today the world’s largest test preparation firm. As described by Fred Danzig, one of Kaplan’s former vice-presidents, over the years Kap *733 lan and ETS enjoyed a relationship of “mutual respect.” Since 1984 Kaplan has been a subsidiary of the Washington Post Company.

In July 1994 Jonathan Grayer, who had joined Kaplan at the end of 1991, became the company’s president and CEO. In an internal memorandum prepared in December 1994 (after Kaplan had presented the findings of its investigation into the GRE-CAT) Nancy Cole, the president of ETS, described Grayer as “young, brash, and arrogant, but- smart and smooth.” Upon assuming his new position Grayer brought on a new management team, replacing what Jose Ferreira (who plays a prominent part in this case) has described on deposition' as “the old guard” with “the new regime.”

Ferreira originally came to work for Kaplan as an instructor and academic coordinator in San Francisco. In August 1993, Grayer and Robert Greenberg (who later became Kaplan’s executive vice-president under Grayer’s new regime) hired Ferreira as Kaplan’s GRE Product Director in the company’s Manhattan corporate headquarters. Ferreira quickly made a name for himself by developing a strategy for answering (without using the problem-solving skills being tested) a series of‘pattem-i.d.” questions that ETS included on an experimental basis on the October 1993 GRE. Danzig, who was still a vice-president of Kaplan at the time, contacted ETS after the October exam was given about the strategy that Ferreira had developed. After meeting with Danzig and Ferreira ETS withdrew the series of questions from future examinations.

C.

It was in August 1993 that Ferreira became Kaplan’s GRE Product Director. He was very conscious of Kaplan’s need to develop the capability to teach its students the methods for taking computerized tests, particularly the GRE-CAT. He perceived that over time ETS would be converting its tests to an adaptive computerized format. He was also concerned that Kaplan’s chief competitor, The Princeton Review, might gain an increasing share of the test-preparation market if Kaplan languished in developing new software and teaching programs. At the same time, he saw a tremendous market opportunity for Kaplan since it had greater computer and capital resources than did The Princeton Review and Kaplan’s other competitors.

In a series of memoranda that Ferreira sent to his superiors over the course of the next year, Ferreira promoted various plans and projects to put Kaplan ahead of the curve in regard to computerized testing. Some of Ferreira’s efforts bore fruit. For example, when in May 1994 ETS released to the public a GRE-CAT software tutorial which it had been providing to examinees (but only on the day of the test), Ferreira persuaded Kaplan management that Kaplan should purchase the tutorial and provide it to its students free of charge.

May 1994 was also the month in which a hearing on computerized testing was held before the New York State Senate Higher Education Committee. There were two aspects of the hearing that, at least as a matter of background, are germane to the present controversy. First, Kaplan’s desire to gain as much knowledge as it could about the GRE-CAT was reflected by the testimony that Danzig gave on its behalf requesting that ETS publicly disclose the items appearing on the GRE-CAT at least twice a year. Second, Kaplan and others raised questions about the security of the GRE-CAT because, given the test’s continuous nature, test-takers could pass on to subsequent examinees the questions that were asked. ETS assured the committee that the examination was secure because “[t]he GRE program has chosen to use many pools of questions simultaneously.” As subsequent events proved, this assurance was ill-founded.

D.

In August 1994 Ferreira sent three Kaplan employees to take the GRE-CAT and took the examination himself soon after.

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965 F. Supp. 731, 43 U.S.P.Q. 2d (BNA) 1566, 1997 U.S. Dist. LEXIS 8255, 1997 WL 314914, Counsel Stack Legal Research, https://law.counselstack.com/opinion/educ-testing-serv-v-stanley-h-kaplan-educ-ctr-ltd-mdd-1997.