March 18, 2019

March 18, 2019

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University Wins Important Tuition Claw-Back Case

A federal bankruptcy court in Connecticut recently ruled in favor of Johnson & Wales University in a tuition claw-back case. Roumeliotis v. Johnson & Wales University (In re DeMauro), 2018 WL 3064231 (Bankr. D. Conn. June 19, 2018). Wiggin and Dana attorneys Aaron Bayer, Benjamin Daniels, and Sharyn Zuch had filed an amicus curiae brief in support of the University on behalf of the Connecticut Conference of Independent Colleges, the Association of Independent Colleges & Universities of Massachusetts, and the Association of Independent Colleges & Universities of Rhode Island.

The federal bankruptcy trustee in Roumeliotis sought to force the University to disgorge tuition payments that the parent-debtors had paid on behalf of their daughter. The trustee claimed that the payments were fraudulent transfers because the parents were insolvent at the time, and because the trustee believed that parents do not receive value when they pay for their adult children's education. The trustee argued that the tuition should be returned to the debtors' estate and be available for distribution to the parents' creditors – even though the University was unaware of the parents' financial circumstances when it received the payments and had long since provided the educational services to the daughter.

The bankruptcy court granted summary judgment dismissing the claim, finding that the tuition was never part of the parents' assets. The decision turned, in large part, on the precise nature of the tuition payments at issue. The parents had used federal Direct PLUS Loans to pay the tuition. However, under that program, the proceeds of the loan were paid directly to the University and never held by the parents. Therefore, the loans were never technically the parents' assets and never were held by the parents. To hold otherwise, the court concluded, would conflict with and undermine the purposes of the Direct PLUS Loan program. The trustee has not taken an appeal.

You can find the Bankruptcy Court decision here You can find the amicus brief here.

We continue to await a decision by the First Circuit in another very significant tuition claw-back case, DeGiacomo v. Sacred Heart University (In re Palladino), No. 17-1334 (1st Cir.). In that case, the Court is expected to rule on the question whether parents received "reasonably equivalent value" for tuition payments they made on behalf of their child. The bankruptcy trustee claims that they did not, because the child and not the parents received the education, and seeks to recover the tuition payments from the University. 

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About this Author

Aaron Bayer Litigation Attorney Hartford Wiggin and Dana

Aaron is a litigation partner who heads the firm's Education Practice Group and previously chaired the firm's Appellate Practice Group.  Based on his experience in government, he also advises companies and non-profit organizations on government regulatory matters and investigations.

He draws on his experience in positions in higher education and government to advise colleges, universities, private secondary schools, and nonprofit organizations on the complex legal, regulatory, and public relations issues they regularly face. His advice is...

Benjamin Daniels Regulatory and Compliance litigation lawyer Wiggin Dana

As Counsel in Wiggin and Dana’s Litigation Department, Ben is a key member of the firm’s Education and Appellate and Complex Legal Issues Practice Group. He works with universities, colleges, independent schools, education associations, corporations, major health care systems, and sovereign nations to solve a range of legal and regulatory challenges.

Ben helps his Education clients navigate rules and regulations relating to compliance with nondiscrimination laws, campus security requirements, financial aid, and privacy and data security statutes. Attuned to the unique demands of the educational sector, Ben also represents institutions in litigation and in investigations by state and federal regulators, including Title IX and Title III investigations.

Ben also represents a broad array of clients in federal and state appellate courts. His practice focuses on complex legal issues. His recent successes include an affirmance in the Federal Circuit confirming that a major German corporation’s patent was invalid; a reversal in the Connecticut Supreme Court, of a $35-million judgment against a major insurance carrier; an affirmance in the Second Circuit, of Yale University's title to one of Vincent Van Gogh's most famous paintings; and an affirmance in the Second Circuit, of an order protecting an American company against a German corporation's abusive discovery practices. He also frequently defends clients at the trial level in software licensing disputes, class actions, patent infringement actions, and other general complex commercial disputes.