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Charlotte School of Law Class Settlement Upheld by 4th Circuit

June 11, 2020, 9:34 PM

Charlotte School of Law’s $2.6 million class action settlement to resolve claims that it misled students about its accreditation status remains intact following an unsuccessful appeal to the U.S. Court of Appeals for the Fourth Circuit.

The unpublished decision, authored by Judge Rossie D. Alston, affirmed the district court’s approval of the settlement in full.

The appeal, filed by a group of around 25 objecting class members, challenged, among other things, the appropriateness of a limited fund settlement, which unlike most class action settlements, doesn’t provide members the ability to opt-out.

Under the U.S. Supreme Court’s Ortiz v. Fibreboard Corp., limited fund settlements may be appropriate when the fund, set at its maximum, still won’t be able to satisfy total liquidated claims, the entirety of the inadequate fund will be devoted to the overwhelming claims, and claimants are treated equitably in terms of distribution.

Objectors argued that the limited fund wasn’t maxed-out and that the defendants disproportionately benefited from the settlement insofar as they were allowed to keep their businesses.

The panel disagreed, concluding that the district judge’s analysis of CSL’s ability to pay was well-supported by evidence that its liabilities far exceeded its assets, and that there were only two available sources of money for the settlement — one of which was an insurance policy that provided for all but $150,000 of the fund.

The class, defined to include all individuals who attended CSL between September 2013 and August 2017, wasn’t over- or under-inclusive, according to the court. And the settlement’s distribution system, whereby the administrator made awards to class members based on the strength and value of their claims, had a rational basis the district court reasonably found fair.

Rejecting objectors’ fairness challenge, the court said the parties were able to conduct the discovery necessary to engage in informed, arms-length negotiations. And the settlement was adequate, the court concluded, particularly given the likelihood that ongoing litigation might further reduce the class’s recoveries.

The court rejected a separate, but related appeal of the district court’s denial of a motion for settlement discovery, concluding the district court didn’t abuse its discretion in finding the objectors failed to show that the settlement shouldn’t be approved or that the discovery was somehow insufficient.

Judges J. Harvie Wilkinson III and Barbara Milano Keenan joined in the decision.

Objectors are represented by Martin & Jones PLLC, Reiss and Nutt PLLC, and Shipman & Wright LLP. Defendants are represented by Cooley.

The case is Barchiesi v. Charlotte Sch. of Law, LLC, 4th Cir., No. 19-1148, 6/11/20.

To contact the reporter on this story: Holly Barker in Washington at hbarker@bloombergindustry.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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