August 27, 2021

Shuttered CEHE College Chain Gets Mixed Appeals Verdict

Shuttered CEHE College Chain Gets Mixed Appeals Verdict

A panel of the Colorado Court of Appeals has upheld part, but also reversed part, of a trial judge’s $3 million verdict against the predatory college operation Center for Excellence in Higher Education (CEHE), its now-shuttered schools, and its principal executives, Carl Barney and Eric Juhlin. The panel ordered a new trial on claims that the defendants violated the state consumer protection law.

The new ruling came in a case that the state’s attorney general filed in 2014, alleging widespread deceptive practices against students by the school chain, in particular at its CollegeAmerica schools. The case was tried in 2017 before Colorado trial judge Ross Buchanan, who issued his decision against CEHE in August 2020.

In April of this year, citing a wide range of deficiencies and misconduct at the CEHE schools, whose main brand by then was Independence University, the schools’ accreditor, ACCSC, ended accreditation. CEHE filed an appeal with the accreditor, an appeal that is still pending.

Meanwhile, the U.S. Department of Education delayed the flow of federal student grants and loans, which had been CEHE’s lifeblood for a decade to the tune of more than a billion dollars in taxpayer money.

Citing a cash shortage, CEHE shut down all its schools on August 1.

In a decision issued Thursday, the Colorado appeals panel decided that Judge Buchanan made an error in ruling that a 2019 amendment to the state’s Consumer Protection Act, which provides that an action brought by the state’s Attorney General “does not require proof that a deceptive trade practice has a significant public impact,” ratified existed case law and applied retroactively. As a result, the appeals panel decided, those claims would have to be retried and the AG would have to prove there was significant public impact.

At the same time, the panel affirmed the trial judge’s decision that CEHE violated the state’s Uniform Consumer Credit Code through abusive practices in its high-interest “EduPlan” private student loans. (CEHE has informed students that even though the schools are shutting down, the company will hang around to keep collecting payments on those EduPlan loans.)

CEHE remains under investigation for student loan abuse by the Consumer Financial Protection Bureau and is being sued for fraud by the U.S. Justice Department in a case that has been pending since 2013. CEHE employees have provided me with details in the past few years about deceptive recruiting, shady financial aid practices, poor educational quality, and other abuses at the schools.

Surely, the systematic abuses by CEHE against numerous students — low-income single mothers and others seeking a better future but often ending up buried in student loan debt — proved at trial did have a significant public impact. But whether the Colorado AG will devote its scarce resources to proving the obvious in another long, expensive trial, especially now that the schools are out of business, we’ll have to see. The AG also could seek review of the appeals decision by the Colorado Supreme Court.

A spokesperson for Colorado AG Phil Weiser told Colorado Politics said the office was studying the ruling.

The Court of Appeals decision calls for “a new trial on all the Consumer Act claims.” The appeals court explained that it could not decide the public interest question on its own, and instead a new trial was needed, because the issue is a question of fact.  But it’s unclear why the court couldn’t have sent the case back to the trial court solely for the purpose of letting the parties present evidence, and the court rule on, the question of whether the public interest was significantly affected, as opposed to re-trying all aspects of the case from scratch, a much larger undertaking. Perhaps the AG’s office could seek clarification or reconsideration from the appeals court on that point.

If the partial reversal of the verdict stands, it could complicate efforts by former CEHE students to get federal loan relief from the U.S. Department of Education on the ground that they were defrauded.

The Colorado appeals panel also rejected CEHE’s argument that it was entitled to a jury trial and that the AG’s claims were improper under a legal doctrine barring suits claiming “educational malpractice.” But the panel granted CEHE’s request that Judge Buchanan be replaced for any retrial, citing his three year delay in issuing a decision after trial. The court called the delay an “extreme circumstance.”

CEHE used some of your tax dollars to hire as its lawyer in the appeal one Sean Connelly, who formerly was a judge on the Colorado Court of Appeals, i.e., the court that heard the appeal. Barney and Juhlin, meanwhile, were represented by Gombos Leyton, long-time protectors of for-profit colleges.

While it spent big on lawyering to fight the Colorado charges, this week, CEHE wrote to at least some employees saying it doesn’t have the money to pay severances promised to them. CEHE blamed the Department of Education, and it warned employees that suing “will not result” in payment. Maybe ultra-wealthy Carl Barney could pay to keep the financial promises to employees, instead of him paying out show-off “prequests” to friends willing to jump through hoops to meet Barney’s demands. Barney has reaped hundreds of millions of dollars from CEHE’s taxpayer-funded operations, including after the schools completed a dubious conversion from for-profit to non-profit status.

UPDATE 09-14-21: CEHE keeps spending on lawyers, rather than honoring its promises to former employees. With a September 7 court filing, the company is continuing its efforts to conceal the records of the Colorado trial. UPDATE 09-18-21: The Colorado attorney general filed a response, opening with “Colorado courts do not hide the records of public trials.”

UPDATE 09-21-21: By letter dated Sept. 17, ACCSC rejected CEHE’s appeal of its loss of accreditation.

UPDATE 10-08-21: ACCSC has posted a document stating that its withdrawal of accreditation for the CEHE schools “is not final due to pending arbitration.” The document includes a two-page comment from CEHE about the ACCSC decision. The comment complains that the schools received unfair treatment from the accreditor and asks, “Why? Retaliation? Political?”

UPDATE 10-25-21: Per notice from ACCSC, the shut-down CEHE schools “remain accredited” but are on probation pending resolution of the arbitration.

UPDATE 10-26-21: We note that on August 26, 2021, the California Bureau for Private Postsecondary Education (BPPE) cited CEHE’s California College San Diego for improper closure. In those circumstances, state law requires full student refunds, and BPPE spelled out in its citation to CEHE that it was required to cancel the requirement that students repay the EduPlan private loans that CEHE had provided.

UPDATE 09-06-22: The Colorado Supreme Court today agreed to review the CEHE decision, in order to address four questions. The first three questions have the potential to produce a stronger outcome for the Attorney General and against CEHE, while the fourth could give CEHE the right to a new trial, this time before a jury:

Whether the division erred when it assumed reversible prejudice based on an error that could have theoretically affected a party’s strategic incentives at trial.

Whether the division erred in requiring a new trial where other procedures, including additional proceedings under Rule 59(f), would satisfy the requirements of substantial justice.

Whether the court of appeals erred when it created requirements for individualized evidence in applying the unconscionability standard in section 5-6-112, C.R.S. (2021).

Whether there is a right to a jury trial when the State seeks large monetary penalties under the Colorado Consumer Protection Act (the ‘CCPA’).