For-profit colleges apparently prefer lawsuits to increased regulation

When the Obama administration announced stricter regulations on for-profit trade schools, the lucrative industry went on the offensive, hiring the best lobbyists money could buy. “Best,” of course, means most effective and should not be confused with doing what is right.

The heavy investment paid off, as this report in The New York Times explains. The for-profit trade school industry succeeded in diluting the regulations that would have set real standards for these programs.

Consumer advocates should be outraged. But of course, the U.S. Supreme Court believes that corporations are people, too, at least when it comes to spending gobs of money on political advocacy. So outrage is probably wasted. Instead, I’m going with cynicism.

See, there is a certain level of irony here. Strong consumer protection regulations set standards. When businesses follow strong rules, consumers can purchase what businesses sell. Businesses make money. The market economy works.

But when there are thin rules or no rules at all, temptation and greed lead businesses down the wrong path. This era of deregulation has created a consumer fraud monster. Banking practices, mortgage scams, and trade school fraud are not coincidence. They are the result of the triumph of deregulation.

When corporate actors go too far and rip off too many for too much, those of us who dare to represent consumers can fight back. But that seems like a lousy way for our system to run. I hear a lot of carping from certain politicians about lawsuits. But isn’t that what corporations choose when they fight meaningful regulations?

They don’t, really, as many members of the plutocracy believe they are entitled to both no regulation and no exposure to lawsuits for misconduct. I only hope there is a special place in Hell for those miscreants.

I’m spending my Sunday preparing for more depositions in our ongoing trade school fraud case against Western Culinary Institute/Le Cordon Bleu Portland and its parent, Career Education Corp. My guess is that no real rules means many more of these cases in the future. I suppose I should not complain about regulatory failure because it means more business for me. In reality, I would be just as happy if I never saw another for-profit trade school fraud problem again. That’s clearly not in the cards. So be it.

Update: Consumer fraud class action against Career Education Corp and Western Culinary

This is a short update for all following our consumer fraud class action against Career Education Corporation and its Portland culinary school, Western Culinary Institute/Le Cordon Bleu Portland.

We’ve been waiting for a ruling from Judge Baldwin on Career Education Corp’s motion to compel arbitration and to dismiss this long-running class action. Judge Baldwin denied the motion, which is another battle won for consumers and members of the class. I am pleased with the ruling, but there is still far to go.

We’re moving now to complete discovery on the merits of the class’s claims. More news as it happens.

 

Career Education Corporation and the terrible, horrible, no good, very bad day

Last week, Career Education Corporation’s stock took a breathtaking fall. It started with the resignation of Gary McCullough, the CEO. That happened so quickly, he did not even have time to offer the usual walk-the-plank rap that he was leaving to spend more time with his family.

The next day, November 2, the company provided earnings information to investors in their earnings call. The earnings call reportedly included revelations that about an internal  investigation by outside counsel.

It seems that independent counsel reviewed the calculation of placement rates at some of CEC’s schools. CEC revealed that placement rates at some of its schools were improperly calculated. That is when CEC’s stock took its breathtaking fall.

The upshot is that Career Education Corporation is facing serious problems. Or, in the words of a favorite kid’s book, CEC had a terrible, horrible, no good, very bad day. Against this backdrop, we continue to pursue our consumer fraud class action against Career Education Corp. and the Western Culinary Institute/Le Cordon Bleu Portland for former culinary students at the Portland campus. The calculation of placement rates is one of the major issues in our case.

I’ll be interested to see what else comes out from these investigations. Regardless of what else comes out, we’re getting ready to complete depositions and get ready for trial.

Update: NPR did a story two days ago. Access it here

Updated: 9 Nov 2011

Update: Western Culinary Institute/Le Cordon Bleu Portland and CEC consumer fraud class action

For those tracking this case, two updates worth noting.

1. As noted recently, Western Culinary/LCB Portland and Career Education Corp filed a motion to compel arbitration and to dismiss this case. More info on that motion here. The hearing date on the motion has been changed to October 7, 2011.

2. There have been many media reports on the settlement of California Culinary Academy (CCA) class action. Some have erroneously reported that the settlement includes this case against Western Culinary Institute. Not correct. I am not connected with the CCA case, so I don’t pretend to know what is going on there. But our case has not settled. That is why we are pushing forward toward trial.

Thanks for checking back and for your continuing patience and interest in the case. If you’re a class member, know that our team continues the long fight. Call or email if you have questions.

David

Western Culinary Institute class action update: Defendants seek another dismissal

This is an update on our culinary school consumer fraud class action against Western Culinary Institute, now known as Le Cordon Bleu Portland, and its parent corporation, Career Education Corporation.

A few weeks ago, defendants filed a motion to compel arbitration of Nathan Surrett and Jennifer Adams’ claims and to stay or dismiss the case.

Some background: Nate is the current class representative. The case is being pursued in his name and through his efforts. Before Nate, Jennifer Adams served as the class representative. She had to step down after the Court narrowed the scope of the class in a way that excluded Jennifer. (If that’s not confusing enough, Adams is Jennifer’s married name. She was previously Jennifer Schuster, which is why that name appears on some of the pleadings.)

Anyhow, back in April, the U.S. Supreme Court issued a really significant anti-consumer decision in the case of AT&T Mobility v. Concepcion. The case is bad for consumers because it strengthens big businesses’ ability to take away consumers’ rights to trial by jury through mandatory arbitration.

So four months after that decision, the lawyers for WCI/Le Cordon Bleu Portland/CEC decided to ask the trial court to dismiss our case because Nate and Jennifer were required to arbitrate their claims. Their motion is long and legally complex. It was filed under seal because it uses student records of the two named plaintiffs. That’s a long way of saying I can’t provide a copy.

While their arguments were complicated, there were a number of glaring problems. We filed our response on Friday. Here is a pdf copy: Response to Def Motion to Compel Arb and Dismiss

Fair warning: it’s a technical brief that may not make much sense if you don’t have a law degree and an interest in this very narrow area. The issues are important for this case and for other consumer cases. I’m posting it here for those following this case and, also, for consumer attorneys out there facing post-AT&T Mobility motions to compel arbitration.

I’m pleased with our opposition. Oral argument is scheduled for Friday, September 23 in front of Judge Baldwin. I don’t know whether Judge Baldwin will rule from the bench. We will update you when we know more.

 

Consumer fraud class action update: Western Culinary Institute, Le Cordon Bleu, Career Education Corp.

Late yesterday, Career Education Corp and Western Culinary Institute/Le Cordon Bleu Portland filed a motion to compel arbitration in our consumer fraud class action. More on the case here.

Short version is that three years after we filed the case, after the trial court certified a class action, after class notice went out, and after the opt out period ran, the defendants filed a motion to compel arbitration. The motion will require a lot of work from the class legal team, but of course, that is why we are here.

It’s a bit hard to fathom why the Career Education Corp and its school waited so long to file their motion. Their story is that they could not have won their motion until the U.S. Supreme Court decided AT&T Mobility v. Concepcion. For reasons best left to the briefing, they are so very wrong in a number of ways.

In many places in their brief, they make arguments that remind me of this video:

Inconceivable!

I suppose in the end we are talking about delay. But of course that’s a problem that bites them as hard as it bites the class. They are on the hook for prejudgment interest if we prevail. That means that every day of delay is more interest on the amounts at issue. With approximately 2500 in the class, we are talking about a lot of money.

Career Education Corp and Western Culinary Institute consumer fraud class action: Notice out

We finally moved to the next phase in our Oregon consumer fraud class action against Western Culinary Institute/Le Cordon Bleu Portland and its parent, Career Education Corporation. Class notice went out last week. It took longer than expected because of a few unanticipated changes in the class brought about by the trial court’s rulings.

Here is a link to the class notice website if you have questions about the case. As class counsel, I represent all members of the class. Feel free to call or email us if you have questions about the case–it is part of my job as class counsel to respond.

My co-counsel, Portland attorney Brian Campf, and I have been working on this case since 2008. We are now engaging in merits discovery. That means reviewing thousands of pages of documents and taking depositions of defendants’ employees.

Trial lawyers often dream about trial. This is one of those dream-inducing cases. While we don’t yet have a trial date, I am eager to move us forward. It’s been a long road, and there is far to go. The good news is that last week represents major progress.

Culinary schools face regulatory pressure

Here is the link to a recent NPR story regarding culinary schools and the disconnect between culinary careers and the costs of culinary school. Interesting quote from the of Career Education Corp. executive Kirk Bachmann about the calculations of placement rates. He notes that CEC schools do not include Starbucks barristas in their placement rates. As we say at the beginning of a deposition, “Swear the witness. I have a few questions.”

On a side note, Le Cordon Bleu Portland/Western Culinary Institute recently announced plans to drop its associates degree.  We’ll be interested in finding out more about that as well.

Meanwhile, our class action case continues forward against these defendants.  Cases like this are slow, but we are on track.

 

Debt trap: for-profit colleges

One of the best articles I’ve seen recently on for-profit colleges. Please, please, please read this if you or anyone in your family is  thinking about a for-profit school.

From the trenches, we continue to pursue our class action against Le Cordon Bleu Portland (formerly known as Western Culinary Institute) and its parent, Career Education Corp. Consumer fraud class actions are difficult cases.

Best to avoid the damage in the first place by saying no to overpriced for-profit colleges.  Don’t let the slick marketing fool you; you’re often better off at a less-costly community college.

One more thing. To our leaders in Congress, your active oversight can fix this problem. But you need to do more than regulate for the future. A generation of students are effectively underwater for life because of lax regulation. Seems to me that you need to fix this problem.

Trade school fraud: Kaplan schools in the news

The New York Times reports here on the Kaplan schools woes.  The Times goes to great lengths to note that its competitor, The Washington Post, owns Kaplan.  I suppose some might see it as a dig and turn of the knife, but it strikes me as appropriate because it helps explain how the owners of the  Post lobby against trade school regulation.

The article focused on the Kaplan criminal justice degree program. I was struck by this quote from a former Kaplan insider:

“In reality *** , graduates would often get the same $8 to $9-an-hour security guard jobs they could have had without Kaplan training.”

It sounds awfully familiar, as it is the same thing we’ve seen repeatedly in our consumer class action against Western Culinary Institute/Le Cordon Bleu College of Culinary Arts-Portland.  There is so much more about it that is insidious, including absorbing federal dollars that would otherwise go to student aid.

The for-profits spend a boatload of money on marketing and advertising. That money comes from tuition, and tuition dollars come straight out of the treasury.

It’s a lousy deal.

We’re still pushing forward on the culinary school case. Nice to see that responsible journalists are reporting on abusive trade schools. As for the Washington Post, you have to wonder.