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Yale, MIT Lose Bid to End Suit Alleging Admissions Collusion (1)

Aug. 15, 2022, 5:57 PMUpdated: Aug. 15, 2022, 7:19 PM

More than a dozen elite US colleges—including Yale, Columbia, and the Massachusetts Institute of Technology—must face antitrust litigation over their alleged conspiracy to hold down financial aid packages while telling the world they admit applicants regardless of financial need, a federal judge in Chicago ruled Monday.

Judge Matthew F. Kennelly let the proposed class action move forward, denying several motions to dismiss the case. The schools aren’t covered by the so-called 568 exemption, which provides a partial antitrust shield for colleges that act in concert to promote need-blind admissions, he found.

Kennelly, writing for the US District Court for the Northern District of Illinois, cited allegations that the schools admit only some students on a need-blind basis. The colleges have argued that the evidence doesn’t back up the claims, but those defenses are for a later stage of the case, the judge said.

He rejected the idea that the lawsuit includes only vague, general, or outdated claims about roughly half of the colleges it targets. The antitrust exemption only applies if all the schools are completely need-blind, which makes detailed allegations about some of them sufficient, Kennelly said.

“Because the plaintiffs plausibly allege that at least one (and possibly all) of the defendants admitted students on a need-aware basis, they plausibly allege that none of the defendants are protected,” the judge wrote.

College Cartel Conspiracy

The suit, filed in January, accuses the university “cartel” of a long-running scheme to set financial aid according to a common formula, rather than trying to attract students by competing to offer the most generous aid packages.

At the same time, more than half of the schools have given preferential treatment to wealthy applicants by tilting the scales to favor the children of past or potential future donors and through a secretive practice known as enrollment management, the suit says.

The other colleges named as defendants are Brown, Cornell, Dartmouth, Duke, Emory, Georgetown, Northwestern, Notre Dame, Rice and Vanderbilt universities, the University of Pennsylvania, University of Chicago and the California Institute of Technology.

Notably absent from the list is Harvard, which allegedly declined to participate in the “568 group” because its leaders bristled at limits on the potential amount of financial aid the school could provide. The suit also doesn’t take aim at Stanford or Princeton universities.

Rejecting Policy Arguments

In his ruling Monday, Kennelly rejected the argument that imposing liability for cooperation over financial aid would deter the types of pacts the 568 exemption was meant to encourage. He disagreed with the idea that Congress couldn’t possibly have intended the exemption to work so narrowly.

Even if penalizing the schools would reduce the incentive to cooperate on need-blind admissions, “Congress has made similar policy judgments regarding other antitrust exemptions,” the judge wrote. “It is the role of the court to effectuate the text.”

Kennelly also let the case advance against three of the schools that say they left the 538 group nearly a decade ago—Brown, Emory, and Chicago—and one, Johns Hopkins University, that joined just last year.

The suit only states that the three schools “claimed” to have withdrawn from the cartel, and it’s plausible Johns Hopkins was aware of the conspiracy when it joined, the judge found.

Major Law Firms Involved

Gilbert Litigators & Counselors PC, Berger Montague PC, Roche Freedman LLP, and Fegan Scott LLC are counsel for the plaintiffs.

Brown is represented by Morgan, Lewis & Bockius LLP. Caltech is represented by Cooley LLP. The University of Chicago is represented by Arnold & Porter Kaye Scholer LLP. Columbia is represented by Skadden, Arps, Slate, Meagher & Flom LLP. Cornell and Rice are represented by King & Spalding LLP.

Dartmouth is represented by Jenner & Block LLP. Duke by Covington & Burling LLP; Gibson, Dunn & Crutcher LLP; and Saul Ewing Arnstein & Lehr LLP. Emory is represented by Jones Day. Georgetown is represented by Mayer Brown LLP. Johns Hopkins is represented by Ropes & Gray LLP.

MIT is represented by Freshfields Bruckhaus Deringer US LLP and Goldman Ismail Tomaselli Brennan & Baum LLP. Northwestern is represented by Sidley Austin LLP,Notre Dame by Williams & Connolly LLP and Michael Best & Friedrich LLP.

Penn is represented by Wilmer Cutler Pickering Hale & Dorr LLP and Miller Shakman Levine & Feldman LLP. Vanderbilt is represented by White & Case LLP, Yale by Hogan Lovells US LLP and Novack & Macey LLP.

The case is Carbone v. Brown Univ., N.D. Ill., No. 22-cv-125, 8/15/22.

(Updates with additional reporting throughout. )

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com