Two Things That Make It Difficult to Sue for-Profit Colleges

News broke in September 2016 that a popular for-profit college was shutting down, leaving 35,000 students with nothing but student-loan debt and course credits that can't be used at any other school. It's understandable that many of them, and people who suffered similar fates at other for-profit schools that have closed, would look for ways to get compensated for the time and money they spent at these facilities. Although they may have good cases for damages, there are a couple of things that make it difficult for such plaintiffs to get their day in court. Here's what you need to know about this issue.

Mandatory Arbitration Agreements

Possibly the most challenging issue facing potential plaintiffs are mandatory arbitration clauses in agreements the students signed when they enrolled in the for-profit schools. Arbitration is a dispute-resolution process similar to mediation. However, any decision reached by the arbiter is binding, meaning all parties are stuck with the outcome of the case. Neither the plaintiff nor the defendant can take the case to court to obtain a better verdict, and some contracts even prohibit either party from appealing the decision.

For-profit schools often include mandatory arbitration clauses to minimize the costs associated with defending against lawsuits launched by unhappy students. However, these suits can be problematic for plaintiffs in a couple of different ways. First, arbiters are supposed to be neutral figures who hear both sides of the argument and work out fair resolutions. However, it's not unusual for arbiters to show bias in favor of companies, and that can lead to adverse outcomes for plaintiffs.

A second issue is that decisions by arbiters are infrequently reviewed by a judge, meaning there likely won't be anyone there to determine whether the arbiter come to the right decision in the case. As noted previously, arbitration decisions are binding, and that can be devastating if the arbiter makes a wrong or poorly thought out decision in the case.

Class-Action Lawsuit Prohibitions

Another thing that can impact your ability to sue a for-profit college is prohibitions against class-action lawsuits hiding in your contract with the school. If your agreement has a clause for mandatory arbitration, then it's highly likely there is also one stating you cannot bring or join any class-action lawsuit against the college. The reason for this, of course, is to minimize the cost of litigation.

Class-action lawsuits allow multiple plaintiffs to join together to sue the target of the legal action. All the plaintiffs share the cost of litigation but must also share any proceeds awarded by the court. This is an excellent way for plaintiffs who may otherwise be strapped for cash to finance a lawsuit, and the number of people involved in the lawsuit increases the chance the court will award a large amount to cover damages suffered by everyone involved. This is something companies want to avoid, and that is why many for-profit colleges have clauses restricting people from participating in class-action lawsuits.

Getting Around Prohibitive Clauses

Clauses like these can severely limit your legal options for recovering compensation for losses you suffer due to the action of a for-profit college. However, it may be possible to get around such clauses. Things depend on the language in the contract, the circumstances of the plaintiff's case, and other mitigating factors like government inquiries. For instance, the Department of Education is investigating these clauses and may ban for-profit colleges who receive federal money from including such clauses in their agreements; this is opening the door for students to take the schools to court to settle grievances.

Another way to get around mandatory arbitration and class-action prohibition clauses is to invalidate the contract itself by showing the school committed fraud in some way, showing that the contract is one-sided in the school's favor, or showing that the contract goes against the public good in some way. It's best to consult with a personal-injury attorney for information about the options available to you and to develop the best strategy to achieving the outcome you want.

For more information, consult a law firm such as Burke Schultz Harman & Jenkinson Attorneys at Law.