The United States Federal Appeals Court agreed on Monday, August 24th, to hear an appeal from Cornell University and several other top universities, challenging a class-action antitrust lawsuit over financial aid that had been approved by a district court and was scheduled for trial in November.
These schools are accused of colluding to reduce the amount of financial aid provided to students, with the case involving over 220,000 students and potential damages exceeding $2 billion.
Federal District Judge Matthew Kennelly officially approved the class-action lawsuit in June, allowing the case to move forward.
The universities immediately appealed, and now have been granted approval by the Seventh Circuit Court of Appeals in Chicago.
The Seventh Circuit Court of Appeals in Chicago stated that it would only review one issue: whether the district court thoroughly reviewed the expert testimony to determine if the students can prove anti-competitive harm through common evidence.
The court may also further examine whether the district court properly evaluated the reliability of the expert testimony under Federal Rule of Evidence 702.
The lawsuit was filed in 2022 in the federal court in Chicago. The plaintiffs accused 17 top private universities in the United States of long-term coordination in calculating students’ financial needs and financial aid, weakening competition in financial aid among themselves, thereby increasing the actual cost of attendance for aided students.
At the time, federal law allowed common principles to be applied in calculating financial need for students and their families when all students admitted by participating schools did not consider financial status, thus enjoying antitrust immunity. The plaintiffs argued that some schools involved still consider family financial status during admissions, thus not meeting the exemption requirement.
Court documents show that the plaintiffs’ expert statistical model estimated approximately 224,700 current and former students eligible for the lawsuit. These students attended full-time undergraduate programs at the implicated universities, received at least some need-based financial aid, and had tuition, fees, housing, or meal costs not fully covered by various forms of scholarships or grants.
The key issue in this appeal lies in whether the statistical model of plaintiff expert Hal Singer can serve as common evidence to prove that hundreds of thousands of students were impacted.
The plaintiffs rely on Singer’s regression analysis to try to demonstrate that the actions of the implicated schools had a collective impact on the student body. The universities, on the other hand, argue that their financial aid policies and disbursement methods vary, and have changed over time, making Singer’s model unable to prove all students were harmed as claimed.
For example, the universities pointed out that some schools filled students’ financial needs with loans, while others replaced loans with grants that do not need to be repaid.
Kennelly did not accept the universities’ arguments, deeming that “Dr. Singer’s testimony has sufficient reliability to be admitted,” and emphasizing the importance of common issues over individual differences among students.
The universities subsequently filed an appeal. Lawyers criticized the district court’s approval of the class action suit, stating it was “entirely predicated on the flawed work of the plaintiffs’ expert.” The Seventh Circuit Court of Appeals agreed to hear this dispute on Monday.
The universities stated that the damages estimated by the plaintiff expert are approximately $685 million; under U.S. antitrust law’s treble damages provision, if the plaintiffs prevail, the final compensation amount could exceed $2 billion.
Currently, 12 universities have reached settlements with the plaintiffs, including Brown University, Yale University, and Columbia University, with a total settlement amount of approximately $319 million. All defendant universities, including those that have settled, deny any wrongdoing.