CHICAGO (Legal Newsline) - Illinois Attorney General Lisa Madigan’s office will be allowed to continue to press its case against a for-profit college it claims deceived students into enrolling in programs that result in virtually worthless degrees and taking on large amounts of student debt to do so.
However, Madigan’s office must now litigate the suit in federal court, rather than state court, after a federal judge earlier this month rejected both the college’s motion to dismiss and the state’s motion to send some of the counts in the complaint back to state court.
In a Sept. 4 ruling, U.S. District Judge Ronald A. Guzman determined Denver-based Westwood College had failed to demonstrate why the state should not be allowed to continue with its litigation over allegations the college’s practices violated both federal and state consumer protection statutes.
At the same time, Guzman also said the state had failed to demonstrate in a separate motion why those claims should not now be tried in federal court.
Guzman’s rulings stem from a complaint Madigan’s office filed in 2012 against Westwood College, which operates online learning programs and campuses in five states, including four in Illinois (two in Chicago, and one each in Woodridge and Calumet City).
In that initial one-count complaint, Madigan’s office alleged Westwood used aggressive marketing and high-pressured sales tactics to falsely convince students a degree from Westwood could land them careers in law enforcement, even though the college lacks the accreditation necessary for its degrees to be recognized by state and local law enforcement agencies in Illinois.
Madigan said students often would not discover the problems until they had graduated and racked up as much as $70,000 in student debt, much of it financed through Westwood’s in-house loan program with interest rates as high as 18 percent.
Earlier this year, the state amended its complaint against Westwood to add a count under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and two counts for alleged violations of the federal Consumer Financial Protection Act (CFPA).
In response, Westwood in May removed the case to Chicago’s federal court, where it then asked Guzman to dismiss the CFPA claims for several reasons, all of which were rejected by the federal judge.
Guzman noted Westwood, because it has operated an in-house student lending program known as APEX from 2002 to the present, is subject to the CFPA and cannot be excused from the complaint simply because the state has, to date, only presented allegations of violations involving students who took out loans before the CFPA took effect in 2011.
The judge further held the state could continue to press its claims of “unfair practices” under the CFPA, as it has alleged Westwood would routinely target potential students who “have little to no knowledge about higher education and financial aid;” identify “salespeople as ‘admissions representatives;’” and provide scripts to salespeople crafted to allegedly mislead potential students and pressure them to both enroll and take on loans.
Guzman also rejected Westwood’s constitutional challenge of the CFPA and determined Madigan’s office had authority under the CFPA to bring a claim without direction from the federal Consumer Financial Protection Bureau, which was created under the act.
While handing the state a victory by denying Westwood’s motion to dismiss, the judge also rejected Madigan’s attempts to limit the federal court’s review of the case only to the federal counts.
The state had attempted to argue the “operative facts” of the federal claims and state law claims were “separate and distinct,” and as such, should be severed.
The judge, however, called this argument a “nonstarter,” noting a state court allowed the claims to be filed under the same suit, meaning a judge had already determined the complaints were closely related with underlying facts in common.
Further, as the underlying facts of the case are the same for both claims, Guzman said he did not share the state’s concern that trying the case in federal court would duplicate the discovery already completed in state court.
Madigan’s office also had argued the case would present an as-yet unanswered question to Illinois law: “Is extending loans to borrowers without considering their ability to pay an unfair practice under the ICFA?”
For that reason, Madigan asserted the state law complaints should be sent back to state courts to answer.
Guzman, however, said, while the question may be new to Illinois courts, it has been addressed in other states and federal courts, and that precedent would allow his court to address the question in future proceedings.
Federal court records show the state is represented by a team of lawyers at Madigan’s office, including Cecilia T. Abundis, Gary Steven Caplan, Susan N. Ellis, Thomas Patrick James, Samuel Aaron Abraham Levine, Oscar Pina, Joseph Michael Sanders, Khara Coleman Washington, John P. Wolfsmith and William Paul Ziegelmueller.
Chicago attorneys Henry M. Baskerville, Joseph J. Duffy and Mariah E. Moran of Stelter, Duffy & Rotert Ltd. are representing Westwood and the other defendants, which include its parent organization Alta Colleges Inc.
Ill. AG's lawsuit against Westwood College will continue in federal court
