Appeals Court Mostly Affirms Multi-Million Dollar Civil Judgment Against Online University
“What Ashford University did to its students was unconscionable and illegal,” said the California Attorney General who sued the online institution and won over $22 million in penalties. A California appellate court lowered the amount by just under one million because of statute of limitations violations, but the defendants, Ashford and Zovio (formerly the now defunct Bridgepoint Education), who used high-pressure tactics loaded with false promises about financial aid and lucrative future jobs, will still have to pay $21,442,329.
Rob Bonta, the California Attorney General, sued the defendants under California’s Unfair Competition Law (UCL), found at Business & Professional Code § 17200, and False Advertising Law (FAL), found at BPC § 1750, in 2017. In 2021, San Diego Superior Court Judge Eddie C. Sturgeon, who presided over the bench trial, found the defendants had violated both laws and assessed the multi-million dollar penalty in 2022. The defendants did not challenge their liability findings but sought a reduction in the penalties.
At the same time, the U.S. Department of Education (DOE) forgave $72 million in student loans from 2,300 former students after conducting an independent review of the facts. A DOE official told Inside Higher Education that “the government will seek to recoup the cost of these discharges from the institution’s current owner,” the University of Arizona, which purchased Ashford in 2020 and renamed it the University of Arizona Global Campus (UAGC).
Defendants argued that the penalty should be reduced because it included violations that occurred after the two laws' statutes of limitations had expired; that the calculations that determined the number of violations were faulty; that the penalty was excessive compared to the harm; and because it was “excessive given the defendants’ financial condition.” Only the statute of limitations issue prevailed when the appeal was heard by a three-justice panel of Division One of California’s Fourth District Court of Appeal, which ruled unanimously. The appellate court agreed with the appellants on the statute of limitations violations and found that the FAL incorrectly included “103,717 excess calls, which, when multiplied by $9 per call, equals $933,453.” The court reduced the judgment by this amount.
The unpublished ruling was written by Justice Truc T. Do on February 20. The opinion began with the history of Ashford University, which was founded in 2005 when it purchased a small, religious university in Iowa and inherited its accreditation, which was necessary for students to receive federal financial aid. In 2020, Zovio sold Ashford to UAGC.
Justice Do explained that a typical degree from Ashford or UAGC costs between $40,000 and $80,000. She noted that “At its peak, Ashford had more than 80,000 students and generated hundreds of millions of dollars annually, the vast majority from taxpayer-funded sources such as Title IV (Federal Student Aid Fun) loans, income-based grants, and G.I. Bill funds.” The students were typically low-income individuals in their mid-thirties, and over half of them were minorities. A previous Ashford University President described Ashford’s students as leading “complex” and “difficult lives.”
The opinion also discussed the tactics the defendants used to enroll students. Each so-called “academic counselor” was expected to call hundreds of leads every day, and those who failed to enroll adequate numbers of students were threatened with firing. One counselor explained that “closing the sale” got “priority over accurate information.”
For example, prospective students were told their degrees would qualify them to be teachers, although in California, additional education was required to obtain a teaching license. They were incorrectly told their degrees would allow them to teach in other states in addition to California. Similarly, callers told students their degrees would qualify them to be nurses, social workers, and drug and alcohol counselors. They also misrepresented the amount of financial aid that would be available and “downplayed future debt.” All these representations, and many others, were lies, and the defendants’ evidence showed they were well aware they were making them.
Defendants’ primary issue on appeal was their claim that the penalties were not calculated correctly because the trial court counted each of the 1,573,400 phone calls “as a separate violation.” Experts reviewed the calls and determined that 1,243,099 of them contained deceptive information. As a result, Judge Sturgeon assessed the defendants $22,375,782 in civil penalties, an amount he believed “was reasonable and supported by the evidence” and calculations by an expert. Defendants filed a motion for a new trial.
Do was not persuaded by any of their arguments. The Fourth Circuit found that each phone call violated State laws by containing at least one deception. In addition, she was not pleased with defendants’ briefs, which she said presented a “one-sided narrative that highlights favorable testimony while ignoring or downplaying the trial court’s adverse factual findings.” She also found defendants’ briefs failed “to properly ground (their factual assertions) on matters of record.” She said she believed the legislature intended the number of violations to be determined by the number of people to whom representations were made, rather than by the number of separate misrepresentations.
The opinion then turned to California law. It explained that the state’s Unfair Competition Law extensively covers “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by the false advertising law.” In addition, FAL ‘broadly prohibit false or misleading advertising, declaring that it is unlawful for any person or business to make or distribute any misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading.” Each of these laws permits the State Attorney General to seek penalties.
Except for the incorrect calculations on the number of phone calls that were made outside the statute of limitations, the Court of Appeal found that Sturgeon made no other errors, did not abuse his discretion, and did not assess excessive fines. Other than the nearly one million dollar reduction, defendants will have to pay for their excessive, “unconscionable and illegal tactics” that disproportionately harmed low-income minorities who simply wanted an education that would give them a better life.
