Minnesota For-Profit Colleges Ordered to Refund Student Money

ST. PAUL, Minn. (CN) – The Minnesota Supreme Court on Wednesday upheld orders requiring two for-profit colleges to refund tuition money to hundreds of former students defrauded by false assurances about a criminal justice degree.

The ruling from the state high court is the latest development in five years of litigation against Minnesota School of Business and Globe University, for-profit colleges that deceived students into enrolling in their criminal justice program with promises that the degree would lead to employment as police or probation officers despite the fact that they are not approved by the Police Officer Standards and Training Board. Certification from board-approved institutions is a requirement for employment in those fields under Minnesota law.

The unaccredited schools were first sued in 2014 by former Minnesota Attorney General Lori Swanson on behalf of a group of former students. In 2017, a Hennepin County District Court judge ruled in favor of the students after a 17-day bench trial during which over 60 witnesses testified, including 15 students induced into enrolling in the criminal justice program. The judge found that the schools’ $120 million in false advertising deceived the students regarding the value of their degrees.

The schools used this false advertising to issue millions of dollars in student loans – some that had interest rates as high as 18% – to the students represented in the case.

The Minnesota Court of Appeals upheld the district court’s order for tuition restitution for the testifying students, but reversed the lower court’s finding that the attorney general had proven enough of a causal nexus to recover restitution on behalf of students who did not testify.

The appeals court also noted that the interest rates on the loans issued by the schools were illegally above the 8% state maximum.

The ongoing legal battle was taken up by current Attorney General Keith Ellison after he was elected in 2018.

Wednesday’s majority opinion, penned by Justice Paul Thissen, limited its scope to considering whether the attorney general proved the requisite causal connection between the schools’ admittedly false advertising and the economic harm incurred by all of the relevant students, including those who did not testify at trial.

Thissen found a clear connection between the schools’ advertising, the students’ enrollment, and the economic harm they suffered in “paying for a degree that did not serve its intended purpose.”

The judge also found the causal nexus strong enough that 1,200 non-testifying students could seek refunds as well, positing that the false advertisements were tailored specifically toward prospective students that wanted to be police officers or probation officers

“The schools would not have spent a total of $120 million in advertising and made law enforcement marketing materials available where they did if they did not believe that prospective students would rely on them,” the ruling states.

Thissen wrote that people “usually does not make lightly the decision to go to school, spend hundreds of hours in class, and pay thousands of dollars in tuition.”

“It is reasonable to conclude that a person who wants to become a police officer or a probation officer will make such an investment of money and time only if the person believes that the classes will provide the requisite qualifications for that career,” the judge said

The state high court’s order affirms the schools’ violations of the Minnesota Consumer Fraud Act and Uniform Deceptive Trade Practices Act and lays out that the restitution claims process outlined by the lower courts will continue as planned, exposing the schools to additional millions in financial liabilities to former students.

Former Attorney General Swanson, who now works as a private attorney, applauded the court’s decision Wednesday.

“We filed suit against the schools five years ago because they defrauded students who wanted to better their lives with a degree,” Swanson said in a statement. “I am gratified that the court ruling gives these students the opportunity to ask for their tuition and other expenses to be refunded.”

Swanson also indicated the significance of the ruling for future enforcement actions. “Had the schools prevailed and been able to limit restitution only to the students who testified at trial—to the exclusion of the remaining 1,200 students—it would be difficult in the future to get money back for large groups of defrauded consumers,” she said.

Not all of the justices on the North Star State’s high court agreed with the majority. Justice Barry Anderson wrote a 13-page partial dissent disagreeing that the attorney general proved enough of a causal nexus to guarantee restitution for students who did not testify at trial. He was joined in his dissent by Chief Justice Lorie Gildea.

Anderson felt that the state did not meet its burden of proof that the non-testifying students relied upon the same misrepresentations as the testifying students, instead basing its opinions on assumptions about what information consumers typically rely on or use to make purchase decisions.

“I cannot join this decision because even defendants who engage in appalling behavior are entitled to require the attorney general to prove his claims,” Anderson opined.

Minnesota School of Business and Globe University closed all their Minnesota campuses in 2016 in light of the legal action.

Representatives with the colleges and the Minnesota Department of Justice could not be reached for comment Wednesday.

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