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Top colleges lose bid to toss financial aid antitrust claims

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A Chicago federal judge on Monday declined to dismiss a lawsuit alleging 17 distinguished US universities conspired for years to limit financial aid to as many as 170,000 students who overpaid tens of hundreds of thousands 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 answer the plaintiffs’ amended grievance by Sept. 9.

The purported class motion filed in January seeks unspecified monetary damages and an injunction stopping the colleges from “continuing to illegally conspire regarding their pricing and financial-aid policies” in violation of US antitrust law. The faculties’ 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 didn’t immediately reply to a message searching for comment. Waxman argued the colleges’ combined motion to dismiss. The faculties have denied liability.

MIT is considered one of 16 distinguished schools accused of conspiring for years to limit financial aid to as many as 170,000 students.Bloomberg via Getty Images

Plaintiffs’ lawyer Ted Normand of Roche Freedman said “we’re gratified by the court’s decision and stay up for 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’s designed to cut back or eliminate financial aid as a locus of competition.” Most 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 necessity for financial aid.

The plaintiffs’ attorneys argued that this shield, called the “568 exemption,” didn’t apply. They alleged that schools don’t admit every student on a “need-blind” basis. The exemption is called after a piece 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 of their admissions decisions. The plaintiffs have met this burden,” Kennelly wrote in Monday’s order.

The litigation will now move into the invention phase, where the plaintiffs might be expected to hunt information from the admission offices of the defendant universities. The plaintiffs haven’t yet filed their bid to hunt formation as an authorized class motion.

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