August 24, 2017 by Philip Lewenstein

Update: Minnesota School of Business Appeals Court Order; Minnesota Supreme Court Rules Institutional Loans Were Illegal

The Minnesota School of Business and Globe University (MSB/Globe) are still fighting adverse court decisions almost a year after a district court found that they engaged in consumer fraud and deceptive trade practices by misrepresenting the job opportunities available for their criminal-justice graduates.

On July 18, 2017, MSB/Globe—Minnesota corporations under common ownership—appealed a Hennepin County District Court order finding of September 8, 2016. (See May 23, 2017, “MSB/Globe Served Constituents Well but Failed to Acknowledge Mistakes”)

On January 4, 2017, the court issued an order awarding an injunction, penalties, and restitution in favor of the state owing to the schools violating Minnesota’s consumer- protection laws. The order established a restitution process for all criminal-justice students who were enrolled in the program between January 1, 2009, to the present (the timeframe covered by the state’s lawsuit) and who believe the schools misled them about their ability to use their criminal-justice degree to become a Minnesota police officer or to become a Minnesota probation or parole officer by completing a two-year associate degree.

At the request of MSB/Globe, the court on February 9, 2017, granted a stay on the restitution process and has kept the stay in place. Then, on July 18, 2017, MSB/Globe appealed the court’s order finding that the schools engaged in consumer fraud and deceptive trade practices. The Attorney General’s Office has opposed the schools’ attempt to appeal, arguing that the Minnesota Court of Appeals does not yet have jurisdiction to consider such an appeal. The parties are awaiting the Court of Appeals’ decision on whether or not to allow the schools’ appeal. Because of the court’s order, the restitution process is delayed until the case works its way through Minnesota’s appellate courts. The court recognized in its order that the appeal process could take up to a year.

Minnesota attorney general Lori Swanson, who filed the lawsuit against the schools in 2014, opposed the schools’ request to stay the restitution process and their attempt to extend the stay. The Attorney General’s Office argued that the schools may not have adequate funds to pay complete refunds to all eligible criminal-justice students if the restitution process is delayed; the office argued that the restitution process should begin immediately unless the schools posted with the court enough funds to ensure that all eligible students would receive full refunds once the appeal process is complete.

In another action, the Minnesota Supreme Court overturned a Hennepin County District Court decision that the schools’ program of high-interest loans was legal. As part of the state’s lawsuit, the attorney general asserted that these loans were illegal and should be declared void so student borrowers (and their co-signers and guarantors) could stop making payments on them and be able to recover payments made on these loans. Although the Hennepin County District Court sided with the schools, the Minnesota Supreme Court on July 26, 2017, ruled that the loans were illegal because the schools were not licensed to make the loans and because the schools charged interest rates (up to 18 percent) higher than allowed by Minnesota law.

On August 3, 2017, the Attorney General’s Office filed a motion seeking an order from the Hennepin County District Court declaring that loans issued on or after January 1, 2009, to any person enrolled at one of the schools’ Minnesota campuses (or any Minnesota resident enrolled in an online program of the schools) are void and canceled. The motion also asks the court to require that the schools refund borrowers for payments of principal, interest, and other charges they have made on those loans, plus interest on those amounts. The motion will be heard by the court on August 31, 2017, after which the court will have 90 days to issue its decision.

Meanwhile, students affected by the court decisions continue to wait for any restitution they may be eligible for as the legal process continues. Many of these students, of course, have had their educational plans altered because of the court decisions against the schools and schools’ resulting closure.

More detailed information can be found on the websites of the attorney general (www.ag.state.mn.us) and the Office of Higher Education (www.ohe.state.mn.us)