A federal judge approved a $2.65 million class action settlement between the now-closed Charlotte School of Law and former students, over the objections of some plaintiffs who said that amount is far too low.
Judge Graham Mullen of the U.S. District Court for the Western District of North Carolina signed off on the settlement Jan. 16 following a two-day hearing, potentially ending two years of litigation over Charlotte School of Law’s slow demise.
Current and former students in 2017 filed four federal and 90 state court suits alleging they were kept in the dark about the school’s accreditation woes. The American Bar Association warned Charlotte of problems in 2014, but those shortcomings were not disclosed publicly until the fall of 2016, after which the U.S. Department of Education ended the school’s federal loan eligibility, which eventually led to its closure in August of 2017.
Kyle Nutt, an attorney with Wilmington, North Carolina, firm Shipman & Wright who is representing 29 of the roughly 80 class objectors, said Wednesday that his clients are weighing a possible appeal. They argued in court that the parties hadn’t provided enough evidence that the school’s only significant financial asset is the $2.5 million remaining under an insurance policy, though Mullen disagreed. David Mills, an attorney with Cooley who represented the school and InfiLaw, did not respond to requests for comment.
Anthony Majestro, one of the plaintiff attorneys who helped reach the settlement, said it’s the best students could hope for given the severely depleted resources of the Charlotte and its parent company, InfiLaw. Further litigation would only drain the remainder of the school’s insurance and lead to an even smaller pay out to former students, Majestro said in an interview Thursday.
“We put on sworn testimony under oath from [the Charlotte School of Law] and InfiLaw, who testified under penalty of perjury about the lack of assets,” he said. “We very clearly established that this settlement gets all there is.”
Under the settlement, InfiLaw will contribute $150,000 to the settlement fund, alongside $2.5 million from insurance. Fifteen percent of the settlement will go toward attorney fees, Mullen ruled.
The class covers any students who attended Charlotte Law between September of 2013 and August 2017—or about 2,500 students, according to the initial settlement motion filed in September. The settlement would need to be $105 million just to refund the entire class for one year of tuition, the motion said. It’s unclear how much each class member will receive. Payments will be determined by a number of factors, including how long claimants attended, whether they transferred, and whether they qualified to have their federal loans discharged through the Education Department.
Once key aspect of the settlement is that it preserves the rights of former Charlotte students to have their federal loans discharged through the Education Department’s closed-school discharge program or its borrower defense of repayment program, which allows defrauded students to discharge their loans, Majestro said.
“It tugged at my heart to hear the stories of people who were objecting,” he said, noting that about 10 objectors spoke in court during the hearing. “As a lawyer who represents students and others who have been victims of fraud, it always bothers me when the person committing the alleged fraud doesn’t have the money to make everyone whole.”
It’s not necessarily the end of the line for former Charlotte students seeking financial redress. The approved settlement bars class members from further litigation against Charlotte Law and InfiLaw, but not InfiLaw’s owners.
A second group of students recently filed suit in Illinois against Sterling Partners, the Chicago-based hedge fund that owns InfiLaw. The initial plaintiffs sought to include Sterling Partners as defendants, but the hedge fund was dismissed because of a lack of personal jurisdiction in North Carolina—a flaw the latest suit seeks to address by being filed in Illinois.