Higher Ed Law Firm Takes on Bankruptcy Trustees in Tuition Battles

The law firm that has bailed colleges and universities out of NCAA athletic-compliance trouble is getting dragged into the bankruptcy courtroom, where fights are increasingly breaking out over tuition payments. The Bond, Schoeneck & King firm is representing several colleges that face demands to return tuition payments made by a student’s parents. That money, court-appointed bankruptcy officials argue, should have paid off the parents’ own bills. The disputes have put repayment pressure on at least 49 colleges and universities, according to a Wall Street Journal tally. Skidmore College officials, for example, hired Bond lawyers to help them keep $87,807 that a Georgia mother paid for her daughter’s education at the private college in Saratoga Springs, N.Y. Bond lawyers have worked for more than 100 colleges and universities that need help on matters such as complying with NCAA rulebooks, negotiating professor contracts and reading the fine print of grants. The firm is “stocked with former NCAA investigators,” according to a New York Times article published in 2007 that traced the niche to the academic fraud scandal at the University of Minnesota’s men’s basketball team. “We do a tremendous amount of higher education work,” said lawyer Stephen Donato, who co-leads the firm’s bankruptcy practice. But will the higher ed expertise help them in the tuition disputes? The bankruptcy judge who is handling a lawsuit against Ithaca College, which was sued in January to return $95,727 for a Connecticut woman’s debts, made it clear that the work won’t be easy. During a hearing last month, Ithaca College’s local lawyer had begun to raise the popular defense that society expects parents to pitch in for pricey schooling costs these days, but U.S. Bankruptcy Court Judge Ann Nevins cut them off. “I’m not happy about these education cases, but there are plenty of folks who can’t afford to send their children to college, and there doesn’t seem to be a constitutional right to send your child to college, as much as some folks would like there to be,” she said during a hearing in U.S. Bankruptcy Court in Hartford, Conn. In the courtroom, colleges face bankruptcy trustees who have the power to take back money that a bankrupt person spent several years before filing for protection if a trustee finds that the person didn’t get “reasonably equivalent value” for that expense. In the case of a child’s tuition payment, the filer didn’t get the value for the expenditure—the child did. At least one other school called in a prominent law firm for help in this precinct. Johnson & Wales University hired the Wilmer Cutler Pickering Hale and Dorr law firm to defend the private, Rhode Island-based college in a lawsuit over $46,909 in tuition, which was paid by a Connecticut couple for their daughter’s education. The hiring signals that colleges are ready for a fight—a shift from their usual strategy. Historically, colleges have opted to settle the disputes quietly using small law firms or their own in-house counsel. But bankruptcy experts predict more of these lawsuits to come as college costs rise and more parents chip in to help their kids. Four judges who have written opinions on the issue were split, and several others have hinted that a fresh ruling is needed to clear up the rules. Congress could beat the judges to it. Less than a week after The Wall Street Journal’s first report on the lawsuits, Rep. Chris Collins (R., N.Y.) introduced a bill that would block bankruptcy trustees from filing lawsuits against universities and college students to recover tuition money that had been paid years before. Write to Katy Stech at katy.stech@wsj.com. Follow her on Twitter at @KatyStech