Judge refuses to toss financial aid lawsuit against top colleges

A Chicago federal judge on Monday declined to dismiss a lawsuit alleging 17 prominent US universities conspired for years to restrict financial aid to as many as 170,000 students who overpaid tens of millions of dollars in tuition.

US District Judge Matthew Kennelly’s order directed the defendant schools — including Brown University; Georgetown University; Columbia University; Yale University; Massachusetts Institute of Technology and the University of Pennsylvania — to respond to the plaintiffs’ amended complaint by Sept. 9.

The purported class action filed in January seeks unspecified monetary damages and an injunction stopping the schools from “continuing to illegally conspire regarding their pricing and financial-aid policies” in violation of US antitrust law. The schools’ lawyers have argued that their clients’ discussions about financial aid policy were exempt from US antitrust liability.

Defense lawyers including Seth Waxman of Wilmer Cutler Pickering Hale and Dorr for Penn; Mayer Brown’s Britt Miller for Georgetown; Karen Lent of Skadden, Arps, Slate, Meagher & Flom for Columbia; and Eric Mahr of Freshfields Bruckhaus Deringer for MIT on Monday did not immediately respond to a message seeking comment. Waxman argued the universities’ combined motion to dismiss. The schools have denied liability.

Plaintiffs’ lawyer Ted Normand of Roche Freedman said “we’re gratified by the court’s decision and look forward to proving our claims.” The plaintiffs are also represented by the firms Berger Montague; Gilbert Litigators & Counselors; and FeganScott.

The lawsuit alleged a “price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition.” Many of the defendant schools are members of an affiliation of universities that discusses financial aid principles.

Federal antitrust law shields agreements between US universities where students are admitted without consideration of a need for financial aid.

The plaintiffs’ attorneys argued that this shield, called the “568 exemption,” did not apply. They alleged that schools do not admit every student on a “need-blind” basis. The exemption is named after a section of the Improving America’s Schools Act of 1994.

To pierce the shield, “the plaintiffs must plausibly allege that the defendants consider some applicants’ need for financial aid in their admissions decisions. The plaintiffs have met this burden,” Kennelly wrote in Monday’s order.

The litigation will now move into the discovery phase, where the plaintiffs can be expected to seek information from the admission offices of the defendant universities. The plaintiffs have not yet filed their bid to seek formation as a certified class action.