The Charlotte School of Law, which closed, is set to pay out $2.65 million to former students under a proposed class-action settlement.

Shortcomings

The suit followed a decision from the US department of education to remove the law school from its federal loan program in December 2016, having found it did not comply with the American Bar Association’s accreditation standard meant to ensure it enrolls only students who ‘appear capable’ of graduating and passing the bar. Students alleged that Charlotte hid its accreditation problems from students to prevent them from transferring, and that it should have disclosed its accreditation shortcomings much earlier. The school attempted to regain access to federal loans but closed in August 2017. The school and student plaintiffs have asked a federal judge in North Carolina to approve the class and the settlement, saying it was the best deal the students could hope to achieve given the dire financial circumstances of the shuttered school and its parent company, InfiLaw Corp.

End of the line

If approved, the class-action settlement would end four federal suits and 90 state court suits targeting the school, and students would not be able to bring further litigation against either the Charlotte School of Law or InfiLaw nor opt out of the settlement. However, the proposed settlement does not bar further litigation against Sterling Partners, the Chicago-based private equity firm that owns InfiLaw. Charlotte School of Law ran a net $8 million deficit in 2017, the year it closed, according to the settlement motion. The motion stated InfiLaw lost more than $7 million in 2017 and $6 million through June 2018. The settlement comprises the $2.5 million left from the school’s insurance policy, as well as an additional $150,000 directly from InfiLaw. According to the settlement motion the company has ‘minimal unencumbered assets that are barely sufficient to permit continued operations.’