Saturday, June 16, 2018
After a law school shuttered, aspiring lawyers hired real lawyers to sue it (WaPo Magazine)
Charlotte Law School is under common ownership with Florida Coastal School of Law, one of three for-profit law schools owned by Sterling Partners' InfiLaw System, which also owns Florida Coastal School of Law and Arizona Summit Law School.
With delusions of adequacy, hick hack St. Johns County Chief Deputy Sheriff MATTHEW CLINE is.among the graduates of Florida Coastal School of Law, daily demonstrating flummery, dupery and nincompoopery, and an argument against for-profit lawyer mills. ABA should ban these profiteers.
(Update: ABA just revoked accreditation for Arizona Summit Law School. Florida Costal Law School may be next.)
After a law school shuttered, aspiring lawyers hired real lawyers to sue it
By Ken Otterbourg
Washington Post Magazine
(Illustration by Brian Stauffer)
The first wave of panic struck the Charlotte School of Law on Nov. 14, 2016, when the accreditation section of the American Bar Association placed the school on probation. Finals were just around the corner, and there was chaos and confusion on the campus, which was stacked on 10 floors in a downtown office building in Charlotte.
According to the ABA, Charlotte Law’s problems were at both ends of the academic tunnel: It was admitting too many unqualified students, those with low grade-point averages and poor scores on the Law School Admission Test, and then too many of its graduates were failing the bar exam. This was the first time the ABA had taken such action, so there was no road map on what could happen.
The school’s students quickly had to make a choice: remain on a listing ship that administrators insisted would be righted or try to transfer. The second path had its own risks: losing credits, which meant staying in school longer, borrowing more money and going deeper in debt.
“My heartbeat actually speeds up when I think about it because it was the most stressful time of my life, easily,” recalls Justin Tolston, then a second-year student at the school. “You have students who are already thousands of dollars in debt and don’t see a path forward at CSL and couldn’t leave. You really saw a sense of frustration and hopelessness for a lot of people and then some optimism, because there were some people who honestly believed there was a path forward.”
Those who stayed made a mistake. A month after the ABA decision, the U.S. Department of Education canceled the school’s participation in federal student loan programs. This was also a first: The agency had taken similar action against other schools, such as Corinthian Colleges in 2014, but never against a law school. Tuition borrowed through these programs was Charlotte’s lifeblood, providing nearly 90 percent of revenue — $48.5 million during the 2015-16 awards period.
With that spigot turned off, the school withered, eventually closing in mid-August 2017. The official alumni group has disappeared. Student records are stored in the North Carolina State Archives. The high-rise campus was abandoned; an empty welcome center and admissions office now flank the walkway to the building’s adjacent parking garage.
Perhaps it is not surprising that as one type of legal education ended in Charlotte, a different type quickly took its place. Hundreds of students filed lawsuits against the school in state and federal court, either as individuals or as part of a class action. It was cruelly ironic: aspiring lawyers hiring real lawyers to sue a nonexistent law school. “All you’re doing now is exercising your rights that you were trying to get a law license or a job that would allow you to do that for other people,” Hoyt Tessener, a lawyer with the firm James Scott Farrin, told a group of potential plaintiffs in Charlotte last year.
There are students who were admitted but didn’t graduate. There are students who graduated but haven’t passed the bar. There are students who have passed the bar but say they can’t find a good job because of the taint of a degree from Charlotte. Central to all these claims are the allegations that the law school concealed the problems that led to the loss of its accreditation and deceived students into taking on enormous debt to attend a floundering school. One figure places the average debt for graduates, which includes outlays on tuition and living expenses, at $161,000.
Through their attorneys, the school and its former leaders declined to comment, but in court filings, they note that Charlotte had “envisioned a unique mission with respect to underrepresented populations” and had sought to create “an environment for persons of all backgrounds and life experiences.” They also say that much of what the plaintiffs allege, even if true, would not fall under the heading of fraud or deception — but rather under educational malpractice, which isn’t a claim recognized by North Carolina law.
This is complicated legal reasoning, and in another setting, it’s easy to imagine law students having a full-throated debate about the line separating fraud from malpractice. But if the defense holds, which it has — most recently in a state court ruling in April that dismissed many of the claims — it may mean that the strange closure of Charlotte School of Law ends up being everybody’s problem but nobody’s fault.
For many years, Charlotte had the distinction of being the largest city in the United States without either a medical school or a law school. (It still lacks a full medical school.) It’s in that context that the Charlotte School of Law opened in 2006. The school’s owner was a company called InfiLaw Corp., which in turn was ultimately owned by Sterling Partners, a private-equity fund in Chicago. In addition to Charlotte, InfiLaw bought Florida Coastal School of Law in Jacksonville in 2004 and opened the Arizona Summit Law School in Phoenix in 2005.
These were all fast-growing Sun Belt cities that lacked law schools, which were attractive investments because they required less capital outlay than many other graduate programs. And the market seemed ripe: Throughout the early 2000s, applications to law school kept increasing.
Charlotte Law positioned itself as a lunch-bucket school: practical, diverse, efficient, more concerned with potential than academic pedigree. Equally important, the year Charlotte opened was also the year the Department of Education started the Grad PLUS loan program, which allowed graduate students to borrow the full cost of attendance and living expenses from the government. Schools needed to be accredited to participate, and Charlotte received provisional accreditation from the ABA in 2008 and then full accreditation in 2011. Quickly, the floodgates opened. In 2010, the campus had 290 students. The next year, 1,151 were enrolled. About 69 percent of applicants were accepted, up from 41 percent the previous year, according to disclosure reports law schools are required to file with the ABA.
“I literally got to watch it go downhill while I was there,” says Karen Vaughn, one of more than a dozen former students I spoke to. She started at Charlotte in 2010 and graduated in 2012. She says it wasn’t just that there were more students; too many of the students in these larger classes appeared less prepared for the rigors of law school. They seemed less professional. Teachers seemed overwhelmed.
Nationwide, law-school applications peaked in 2004, at just over 100,000 applicants. Those students graduated just as the recession hit. Tales of their mounting debt and struggles to find jobs discouraged future applicants. It was a legal death spiral, and by 2011, applicants had fallen to 78,500 students. Yet this happened to be the same year that Charlotte Law School nearly quadrupled in size.
As the school expanded, the percentage of students passing the bar plummeted — from 84 percent of first-time takers in 2010 to only 46 percent in 2015. And the school’s 2015 passage rate was likely propped up by a practice where, according to plaintiffs, graduates who had registered for the exam were paid to delay taking it and instead participate in an extended period of bar prep. Because they had registered, if they took the exam later, they weren’t counted as first-time test takers and weren’t used in calculating passage rates. (In a response filed in a whistleblower lawsuit, the school’s attorneys said that critics “put a deleterious and flawed spin on InfiLaw’s programs, which were voluntary programs designed to assist students who needed more time to study for the bar but could not afford the living expenses.”)
It was during this time that the ABA began the reaccreditation review. It spent much of 2014 poring over Charlotte’s operations, issued a preliminary report and asked for more information. In an email to students and faculty sent March 12, 2015, Jay Conison, the school’s well-connected dean, said that the accreditation process was going well and that reviewers just had a few questions. “I previously served in the role of Chair of the ABA Accreditation Committee,” he wrote, “and in my experience decision letters typically contain more requests to report back than does ours.”
On Feb. 3, 2016, the ABA notified the school that it wasn’t in compliance with accreditation standards concerning admissions and bar passage. It again requested additional information but didn’t require any student notification. On July 21, 2016, the ABA said its findings hadn’t substantially changed and instructed the school to notify students. The school appealed, which under ABA rules stayed the need to notify. The appeal was denied, and when the school was placed on probation in November, it was finally forced to tell students. The bulk of the litigation against the school uses this timeline to claim fraud and deception; plaintiffs say the school was out of compliance with ABA standards for nearly a year before students knew of the problems. Armed with that knowledge, some might have transferred; others might not have enrolled.
The school’s attorneys say in court filings that the review process is designed to be confidential and that the school was not officially ruled out of compliance until November 2016, and then, as instructed, it notified students. In addition, they note that it wasn’t actually the ABA probation that sank the school; it was the Department of Education’s action, which the school’s attorneys say was “extreme and politically charged.” More recently, the school has taken a different tack and in May filed suit against the ABA for violating its due process. The ABA says courts have regularly upheld its accreditation process.
Barry Currier, the managing director of the ABA’s section on legal education and admission to the bar, told me he agrees with the school on the timetable; despite the trail of paperwork and working reports, Charlotte was not officially out of compliance until the final ruling in November. But he also says he understands the damage done in the interim.
Before coming to the ABA in 2012, Currier was the dean at Kaplan University’s Concord Law School, a for-profit online institution that has not sought ABA accreditation. (Until 2013, Kaplan was owned by the same parent company as The Washington Post. Recently, Kaplan sold Concord Law School to Purdue University.) “There’s a false line between for-profit and not-for-profit that’s usually drawn on these discussions,” Currier says. “There isn’t a university really in the country that isn’t interested in having a surplus at the end of the year. Surplus is profit. So, I think it’s quite possible for a for-profit law school or for-profit higher education institution to operate and be successful so long as they exercise good judgment.”
Many students described the practices of the Charlotte School of Law in terms that seem to come straight from a telemarketer’s boiler room. First, they were aggressively wooed. Tolston, for example, was a graduate of the University of Nebraska and working in the warehouse at Omaha Steaks at the time he began considering law school. He says he was recruited after registering for the LSAT and offered a merit scholarship of $9,000 a year. That hard sell concerned him, but he also wanted to start right away, and Charlotte allowed students to begin school in the winter term. “They let it be known from the beginning that this was not Harvard or Yale,” he recalls.
“It was like dating,” says another student. “Once you got accepted, the phone calls stopped.” In court documents, some students said they were offered scholarships that were contingent on high GPAs, then placed in class sections where the grading curve made it difficult to maintain that average.
Charlotte’s attention to the bottom line — its need to make money and to pay back investors — created pressure on operations. As enrollment dropped, the share of revenue directed toward education fell from 66.4 percent in 2012 to 29.8 percent in 2016, while the share to institutional support and management fees increased from 30.9 percent to 46.7 percent, according to a 2017 review of the school’s finances done on behalf of the University of North Carolina Board of Governors (which was reviewing Charlotte’s license to operate). “The data suggest that CSL’s cost management initiatives may be designed to maintain profitability at the expense of CSL’s core educational programming,” the report said.
While the ABA review was underway, Charlotte’s applicant pool collapsed. In 2016, only 2,189 students had applied, down from 4,040 in 2012. And the students being admitted had lower undergraduate grades and scores on the LSAT, two important predictors of success at law school and on the bar exam.
For many students, Charlotte used a screening system called AAMPLE, which stands for Alternative Admission Model Program for Legal Education and was developed at Nova Southeastern University’s School of Law near Fort Lauderdale, Fla. It was a summer program designed to simulate the subject matters and the intensity of law school, and those who passed were offered admission. At Nova, typically 40 to 45 percent of the AAMPLE students passed and were admitted. At Charlotte, it was often well above 60 percent. And those who didn’t succeed through AAMPLE were sometimes offered another path to admission through completion of a skills assessment that was administered by Kaplan Inc.
Nearly all the former students I spoke to had tales about AAMPLE, either as participants or observers. Ruth Calle said that she and about 100 other students in her One L class of 2012 were AAMPLE admits and many of them — including herself — were later academically dismissed (she said that an abusive relationship with a fellow student also contributed to her problems, and that the school didn’t help her during this crisis). “I was so naive,” she says. “If I do a summer program and pass it, they’ll offer me a seat. I knew it was for-profit, but I did want to go to law school.”
As Charlotte began pushing more marginal students into the pipeline, its rate of academic attrition soared. In 2015, the rate for first-year law students reached 37 percent of a class of 350 students, the highest in the nation. The school’s approach to attrition was apparently by design. “At the end, our mandate was to flunk people right away,” Beau Baez, a former associate dean and instructor at the school, told me. It was better to do it early, he says. It could even be considered a service to the students: “You wouldn’t want them to be saddled with a lot of debt.”
Hundreds of former Charlotte Law students have asked the Department of Education to discharge their student debt through borrower-defense claims that they were defrauded or misled by the school. There is also a federal class-action lawsuit and more than 140 individual complaints in state court. They are an alphabet of woe, and it is hard not to feel sorry for the experiences that these men and women say befell them. One woman borrowed $226,000, was able to graduate, but failed the bar four times. Another was a nurse with a good career who relocated to North Carolina. She said she was offered admission despite being unable to pass her AAMPLE courses and then dismissed for poor grades. She no longer wants to be a lawyer.
It’s intuitive to tie the collapse of Charlotte Law to allegations of predatory recruiting practices or lax regulation or even the ready availability of student loans. These are institutional failings. But what about the individual students and their role in the school’s demise? That is more problematic. It’s hard to know where a lack of self-awareness ends and deception begins. This is not to blame the victim, but I read every complaint and could find only one instance where a former student at Charlotte stated that he never should have been admitted. Many, although not all, had test scores that indicated there was a high likelihood they would have a difficult time graduating and then passing the bar, but appeared sincere in wanting to be lawyers and sincere in their beliefs that they had what it took to achieve that goal.
The problem was that these students were essential to the business model. “I think a huge part of it was the ability to provide access to people who were traditionally shut out of law schools, and that was a huge part of CSL,” says Tolston, who transferred from Charlotte in 2016 and just graduated cum laude from Texas Southern University’s Thurgood Marshall School of Law in Houston. He has sued his former school, in part to recover the costs of transferring. “They didn’t have a come-to-Jesus moment where they told you that the reality doesn’t line up with your ability.”
Brian Clarke, who taught business law in Charlotte from 2011 to 2016, says, “The gatekeeper was the administration, and they should have been guarding the gates.” The faculty, he says, was given the task of cleaning up the mess. “When we called students in who were failing but weren’t ready to withdraw, every single time they would say, ‘You don’t know me. I’m going to do it.’ Did they ever do it? No. Sometimes, the kindest thing we could do for a student was give them an honest grade.”
I spoke with several Charlotte Law graduates who had been unable to pass the bar. They worked as clerks and paralegals, so close and yet so far from what they sought. By and large, they were reflective rather than angry. They hadn’t quite given up, but they were often worn out and had chosen to press pause while they figured out a plan.
Mike Medina lives in Centreville, Va., with his wife and two kids. He is a contractor with the U.S. Securities and Exchange Commission. He graduated from Charlotte in 2014 but didn’t pass the bar, a situation he blames in part on faculty turnover that he says left some critical gaps in his education. Even with the scholarships Medina received, he is $100,000 in debt. “I’m not bitter about it, but if I had to do it all over again I wouldn’t go there,” says Medina, who is not part of any litigation. He has put off retaking the bar exam. Bar prep is expensive, and he has mouths to feed and bills to pay, including servicing his student debt from a school that no longer exists and issued him a diploma that means little in the larger world of the legal profession. “I have a dream,” he says, “and I’m not sure how much it’s worth at this point.”
Others did pass the bar. Karen Vaughn was admitted to the North Carolina Bar in 2013 and now has a practice with a concentration in education law in Mooresville, just north of Charlotte. Which all sounds fine, except for the fact that she is a single mother of three who says she owes $250,000 on her loans for tuition and living expenses and hasn’t paid back any of the debt because she is a solo practitioner from a now-defunct law school with a terrible reputation and she doesn’t make enough money to require repayment. All that said, she considers herself one of the lucky ones. She’s not part of any litigation. “I feel badly for people who didn’t graduate,” she says. “The people who got to transfer are very lucky. They’ll be in school for a longer time, but they don’t have a diploma from CSL on their wall.”
On April 20, 2018, attorneys for the federal class-action plaintiffs and the law school signed a memorandum of understanding that is the outline for settling most claims for nearly 2,000 students who conform to the class-action guidelines. It was the same day that a state judge struck down many of the claims of the individual plaintiffs. The terms of the proposed class-action settlement are confidential and have neither been publicly released nor approved by the court; the deal could still change. But, according to a copy I obtained, the average student award would be only $1,358. Some students could receive up to $7,500. Others, as little as $100.
The settlement was so small because the pool from which it was tapped was so shallow. Here's why, according to a summary of the agreement prepared for some of the potential plaintiffs: The Charlotte School of Law had two $5 million insurance policies. That was not a lot to begin with, but by the time the memorandum of understanding was signed, the funds available from those policies for claims by its former students had shrunk to about $2.7 million. Fees for the defendants' attorneys, the bluest-chip lawyers from some of the finest law schools in the land, had taken the rest.
Ken Otterbourg is a writer in North Carolina.