Law Schools

Students Suing Failed For-Profit Law School Reach Shockingly Low Settlement Due To Parent Company's Financial Straits

This settlement is nowhere near the amount needed to make all class members whole, and it's sad.

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Charlotte School of Law, the North Carolina law school that once boasted bar passage rates of zero percent, closed in August 2017, months after the Department of Education kicked the school out of its federal loan program. Fraud lawsuits filed by aggrieved students quickly began to pile up, leaving the embattled shell of a school struggling to fight four federal suits and 90 state court suits.

Earlier this week, student plaintiffs and Charlotte Law asked Judge Graham Mullen of the Western District of North Carolina to grant preliminary approval for their class and their proposed $2.65 million settlement, claiming that both the failed school and its faltering parent company are in dire financial straits, so this is the best deal students could possibly achieve.[1] Judge Mullen granted that approval. Here’s more information from Law.com on just how bad things are looking for InfiLaw:

Charlotte School of Law ran a net $8 million deficit in 2017, the year it closed, according to the settlement motion. InfiLaw lost more than $7 million in 2017 and $6 million through June 2018, the motion said. The settlement consists of the $2.5 million left from the school’s insurance policy, as well as an additional $150,000 directly from InfiLaw.

“They’re giving us everything that’s left. It’s hard to do better than that,” said Anthony Majestro, an attorney with Charleston, West Virginia, firm Powell & Majestro, one of six firms representing the plaintiffs involved in the settlement. “The problem with continuing to litigate is that the way their insurance policy works, it reduces the amount available to pay claims. In another year, there would be nothing left, if not sooner. That’s why we believe this is in the best interest of the class.”

An InfiLaw spokesman did not immediately respond to requests for comment on the settlement, but according to the settlement motion the company has “minimal unencumbered assets that are barely sufficient to permit continued operations.”

The proposed class consists of about 2,500 Charlotte students who attended between September 2013 and August 2017 who each paid $42,000 annual tuition on average. At this point, it’s difficult to determine what each claimant here will receive, but according to Majestro, this settlement is nowhere near the $105 million that would be needed to refund the class for even one year of tuition. “We have got everything that is possible to get as a defendant,” he said. “As sad as it is, when you get almost all of the resources and continued litigation will deplete the resources, we really don’t believe we have a choice.”

Perhaps this settlement will serve as a warning to both prospective law students and the law schools of this ilk that seek to prey upon them. These law schools will be run into the ground and forced to close if they continue to take advantage of students, and those students, in turn, could be left with hundreds of thousands of dollars of educational debt and a school too cash-starved to even cover a real recovery. Perhaps a few students from the class will be made whole from the settlement, but this entire situation will leave a bad taste in your mouth if you were pulling for these students to truly pull out a win against a school that seriously wronged them.

[1] InfiLaw is out of money… except when it comes to paying one of the top litigators in America. There’s apparently always room in the budget to pay Kirkland & Ellis.

Defunct Charlotte Law School and Ex-Students Reach $2.7M Settlement [Law.com]

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Staci ZaretskyStaci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

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