A MAJOR CLASS action lawsuit filed in federal court in San Francisco this week calls out the educational technology or “EdTech” industry’s practice of mining student information to create data “dossiers” on students and parents that is then monetized by sharing with third parties for a fee.
Two Contra Costa County students — identified only by their initials — and their parents allege that PowerSchool Holdings Inc. routinely collects and uses their data for commercial purposes without having first obtained their consent. They seek to represent nationwide and California classes of students and parents seeking forward-looking reform and backwards-looking compensation.
PowerSchool’s business
PowerSchool is a for-profit information services company in the EdTech space. The company went public in 2021 and today has a market capitalization of about $3.2 billion, according to information on Yahoo Finance.
While far from a household name, PowerSchool “is widely recognized as the leading provider of cloud solutions for K-12 education, serving organizations representing over 80 percent of all K-12 students in the U.S. And Canada,” according to its filings with the U.S. Securities and Exchange Commission.
PowerSchool explains that its basic business model is “software as a service” or “SaaS.” The backbone of its business is its “Student Information System” or “SIS” that is used to collect and store comprehensive student and school information in a cloud-based system.
School districts and others subscribe to use the company’s SIS to collect, store and manage student and school information throughout their districts. The process is part of a broad transformation from legacy data practices to a comprehensive digital system stored in the cloud.
PowerSchool proudly reports that “Our systems comprise the hub for core school operations, classroom instruction, and human capital management” and “Our platform is embedded in school workflows and is used by educators, students, administrators, and parents on a daily basis.”
The company’s software is used in 90 of the country’s largest hundred school districts.
Among the benefits from the single integrated data management system, school districts can manage “state reporting and related compliance, special education, finance, HR, talent, registration, attendance, funding, learning, instruction, behavior, grading, college and career readiness, assessments, communications, and analytics in one unified platform,” the company says.
A goldmine of data
PowerSchool’s business gives it unparalleled access to student data.
In a monster 88-page complaint filed Monday, the plaintiffs describe education as “the world’s most data-mineable industry by far,” and PowerSchool is in a unique position to do the mining.
The complaint alleges that by signing school districts onto its SIS platform, “PowerSchool gains virtually unfettered access to the data of the children who attend those schools.” The data it collects is described in a two-page bullet point list divided into nine broad categories that include demographic, disciplinary, medical, device, college and career information, as well as all the data included in traditional school records.
According to plaintiffs, “Much of this data includes highly sensitive, personal information that invade and infringe upon the innermost thoughts, insecurities, and actions of each student.”
“Other data — although perhaps relatively benign as raw, individual data segments — when combined and processed, enables PowerSchool to build dynamic, robust, and intimate dossiers of users, including children and their parents.”
The plaintiffs contend that PowerSchool “uses, markets, and sells those dossiers to third parties — including the licensing school district — to identify and target those users with precision.”
The goal is to use the data to make predictions about students and parents “for the purposes of manipulating their behavior and influencing decision-making about their lives now and in the future.”
PowerSchool allegedly has not only collected data from its clients’ schools, but it has bought up other companies in adjacent areas and in that process acquired even more data. For example, it acquired Naviance, a company that helps students identify colleges of interest, and then, by using student test scores, grades and other personal information provided both by student and teacher, predicts their likelihood of gaining admission.
Non-consenting data donors
The plaintiffs are conscious that data collection is ubiquitous in the modern digital society, but they ground their claims on two fundamental facts that they contend make this situation different.
First, much society-wide data collection occurs in connection with consumer choices to voluntarily use apps or services — like search engines — that collect user data. However, most of PowerSchool’s clients are public schools that students are compelled to attend. When they attend, students have no choice about whether their data is collected; if their district uses PowerSchool’s SIS, their data is hoovered up.
Second, unlike much of the data collected on the web, PowerSchool’s data mining is targeted at minors, a uniquely sensitive and legally protected group.
The complaint raises claims under many different legal theories, but one core issues runs through them: the lack of consent.
The plaintiffs contend that there is no “effective consent” to PowerSchool’s data practices. They advance a cluster of reasons why that is the case.
First, PowerSchool allegedly does not advise students and parents what data it collects, how it uses the data, who it shares the data with, and what are the risks for the student and parents. Without that information, the plaintiffs contend no effective consent is possible.
The plaintiffs contend that most of PowerSchool’s clients are public schools that students are compelled to attend, and thus have no choice about whether their data is collected.
Second, the plaintiffs say that PowerSchool does not disclose its data practices in a clear and understandable manner. For example, it says that PowerSchool provides assurances of privacy that could only be understood by the most diligent of consumers through access to third-party agreements that are kept confidential.
The complaint eviscerates PowerSchool’s representations about its commitment to data security, privacy protection, and the safeguarding of personal information.
A core contention is that parental consent is required to use the data of a minor student and PowerSchool does not obtain parental consent. Rather it tries to outsource to its school district customers the responsibility for obtaining parental consent: “customers are responsible or obtaining consent for PowerSchool to process Customer Data.”
The plaintiffs say PowerSchool contends that their client schools own their student data and/or can authorize PowerSchool to collect and use the data.
Plaintiffs argue that the schools do not own data collected from students and cannot legally consent to collection of personal information about — and belonging to — students, “particularly when the collection is conducted by a privately owned, for-profit technology company for commercial purposes.”
The complaint is super-charged by sections that allege that PowerSchool is using AI to expand the types and categories of data it is collecting and that it uses design tricks to manipulate students into sharing even more personal information.
Data monetization and third-party access
It appears that one core purpose behind the collection of data is to use it in specific applications or products that it markets back to its existing customers. Thus, a school district that uses the SIS might be marketed — at an extra cost — a product that would, for example, determine if particular children were “at risk students.”
PowerSchool markets more than a dozen data-derived products to its clients.
But the complaint says that PowerSchool’s monetization of the data goes far beyond sharing back information with their client schools. The plaintiffs contend that PowerSchool has more than a hundred arrangements with other companies that let third parties have access to the information it has collected.
For example, it says that PowerSchool markets the dossiers it has built about high school students to “universities, trade schools, private employers, and the military” and the information it shares will allow those institutions to “target — or avoid — potential applicants.”
A challenge to the EdTech industry
One of the law firms that filed the PowerSchool complaint is an Austin-based operation called EdTech Law Center PLLC. The tagline on its website says that its “mission is to keep education free and not conditioned on submission to persistent surveillance and commercial exploitation of student information.”
On Tuesday, the same law firm filed a very similar suit against another company in the EdTech space, this one IXL Learning Inc. Like the PowerSchool case, the IXL suit is a class action filed in federal court in San Francisco.
In each of the lawsuits, the EdTech Law Center is co-counsel with a well-known litigation firm that is a frequent player in the very high stakes world of class action litigation. But this is a new arena for EdTech Law Center, whose principal is an unassuming lawyer named Julie Liddell.
In an interview Wednesday with Bay City News, Liddell said that for her, the issues in the case are a calling. She said that she and her husband have been working for six or seven years in the area as activists and trying every strategy they could think of — grassroots organizing, talking to school districts, legislatures and regulators — but things were not fixed.
She started to talk with other lawyers about a lawsuit without much success until she decided to draft a complaint that she could use to show the theory of such a case. She said, “I just locked myself in my office and wrote and wrote and wrote and finally had a complaint.”
With complaint in hand, she engaged with many firms over six months and finally found a couple who said, “OK, we see what you’re doing here.”
The two suits filed this week are not the end of it; more are coming, including some against school districts. She sees the goal as transforming the entire basis of the EdTech industry.
One particularly damning contention in a white paper prepared by Liddell is that “EdTech has not improved educational outcomes because its products are not built to optimize for that; they’re built to optimize for data extraction and exploitation.”
“In other words,” she says, EdTech tools “are working exactly as designed, just not as advertised — at least not as advertised to their school customers.”
She doesn’t believe that the collection of all information from students is inappropriate, but for her the key issue is parental consent.
“Let’s start with letting parents decide what they’re comfortable with, based on all of the information, based on meaningful disclosures that actually convey information and don’t just baffle with bull—-,” she said.
PowerSchool did not accept an invitation to comment on the lawsuit.