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New Cases and Developments

NACUA's Legal Resources staff summarizes current higher education cases and developments and provides the full text of selected cases to members. New cases and developments are archived here for up to 12 months.  Cases provided by Fastcase, Inc.

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Financial Aid; Bankruptcy & Student Debt; Students

Chorches v. Catholic University of America (D. Conn. July 13, 2018)

Ruling denying Defendant’s Motion to Dismiss. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Catholic University of America (CUA) to recover tuition payments made by Debtors, the parents of a CUA student over the age of eighteen, totaling $64,845.50. At issue was whether the Debtors received less than “reasonably equivalent value” in exchange for the transfer and alternatively, whether the Debtor and their daughter should be considered a single economic unit. Limiting the definition of “reasonably equivalent value” to purely economic terms, the court found that the Debtors’ moral obligation to pay their daughter’s college tuition did not amount to a legal obligation and any “anticipated economic benefit they [would] have gain[ed] in having a financially self-sufficient daughter due to her college education” were speculative. The court further found CUA’s single economic unit argument unpersuasive since the federal laws they cited—the Expected Family Contribution age provision under Title IV’s formula for need-based student aid, provisions of the Affordable Care Act that require insurers to keep individuals under twenty-six on their parent’s insurance, and provisions of the tax code that recognize exemptions for qualifying dependent children under the age of twenty-four—did not impose a parental obligation to financially support their children’s education after age eighteen. Last, despite the Connecticut General Assembly’s amendment of its bankruptcy statute to exclude undergraduate tuition payments from recovery as constructive fraudulent transfers, the court found that the amendment did not apply retroactively to the case at hand.

7/16/2018
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Financial Aid; Bankruptcy & Student Debt; Students

Roumeliotis v. Johnson & Wales Univ. (Bankr. Conn. June 19, 2018)

Memorandum Decision granting Defendant’s Motion for Summary Judgment. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Johnson & Wales University (JWU) to recover tuition payments made by Debtors, the parents of a JWU student, pursuant to Federal Direct Parent PLUS loans. Plaintiff argued that the at-issue payments were constructive fraud transfers because they constituted “an interest of the debtor in property,” under the Bankruptcy Code and similar provisions of the Connecticut Uniform Fraudulent Transfer Act (CUFTA). Reconciling the statutory framework of the Higher Education Act of 1965 and Parent PLUS loan program with applicable Bankruptcy Code provisions, the court determined that the Debtors never had an “interest” in the PLUS loans since they lacked possession or control of the funds. Consistent with the holdings in Eisenberg v. Pennsylvania State University and The Majestic Star Casino, LLC v. Barden Development, Inc., the court noted that finding otherwise—and therefore making the funds available to Debtors’ creditors—would undermine the Congressional intent of the HEA and PLUS loan program, which expressly requires funds to be transmitted directly to educational institutions, rather than the parent-borrower, so that funds are only used for educational expenses. Moreover, a contrary holding would unduly increase the Debtors’ interest in the PLUS loan proceeds, which they would not have otherwise had possession of before filing for Chapter 7 bankruptcy.

6/19/2018
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Financial Aid; Bankruptcy & Student Debt; Students

Novak v. Univ. of Miami (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting Defendant’s Motion to Dismiss. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against the University of Miami to recover tuition payments (totaling $66, 616) made by Debtor, the parent of a University of Miami student, pursuant to a Federal Direct Parent PLUS loan. Plaintiff argued that the payments were constructive fraud transfers because they constituted “an interest of the debtor in property,” under the Bankruptcy Code and similar provisions of the Connecticut Uniform Fraudulent Transfer Act (CUFTA). Looking to the federal and statutory framework of Parent PLUS loans, as well as the holdings of Eisenberg v. Pennsylvania State University and Shapiro v. Gideon, the court found that the Debtor never had an “interest” in the Parent PLUS loans since she lacked possession or control of the funds. Further, the court found that the loan proceeds “could not have been available in any circumstance to pay [the debtor’s creditors],” thereby concluding that such a finding comported with the “spirit and purpose of fraudulent transfer provisions in the Bankruptcy Code and CUFTA.”

3/2/2018
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Students; Bankruptcy & Student Debt; Financial Aid

Boscarino v. Ithaca College (Bankr. Conn. Feb. 27, 2018)

Memorandum of Decision granting the Defendant’s Motion for Summary Judgment. Plaintiff, a U.S. Bankruptcy Code Chapter 7 Trustee, initiated an adverse proceeding against Ithaca College to recover tuition payments made pursuant to a Federal Direct Parent PLUS loan. Finding Eisenberg v. Pennsylvania State University and Novak v. Univ. of Miami dispositive on the matter, the court held that the Parent PLUS loan payments were not part of the Debtor’s estate, either “prior to the filing of her bankruptcy petition” nor would they “have been available for distribution to her creditors at that time,” and therefore were not fraudulent transfers to Ithaca College.

3/2/2018
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Bankruptcy & Student Debt; Students

Chorches v. The Catholic University of America (D. Conn. October 16, 2017)

Order granting Defendant’s Motion to Dismiss. Plaintiff, a trustee of the bankruptcy estate of the Franzese family, alleged that the Franzeses fraudulently transferred funds to Catholic University as payments for their daughter’s tuition in an effort to deter or hinder collection by their creditors. For a successful fraudulent transfer claim, Plaintiff had to prove that the Franzese family was insolvent on the date of the transfer or became insolvent as a result of the transfer, and that Defendant received less than a reasonably equivalent value for the good or service offered. The court found that Plaintiff failed to plead facts showing that the Franzeses were financially distressed when they made the alleged payments and therefore, Plaintiff could not prove that the Franzeses were insolvent on the date of the transfer or became insolvent as a result of the transfer. 

10/18/2017
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Financial Aid; Bankruptcy & Student Debt; Students

Hugh Lawrence Brooks v. University of Maryland, et al. (Bankr. S.D. Ind. September 14, 2017)

Order granting Defendant’s Motion to Dismiss or in the Alternative, for Summary Judgment. Plaintiff sought to discharge his student loan debt from the University of Maryland for undue hardship. The court found that Plaintiff could not meet the burden of proving undue hardship because he was the only member of his household, had net annual earnings of over $110,000, and by his own admission acknowledged that “his income and expected future income is and will be adequate for him to afford the basic necessities of life.”

9/20/2017
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Bankruptcy & Student Debt; Students

Amicus Brief in DeGiacomo v. Sacred Heart University, Inc. (July 19, 2017)

Amicus brief by the American Council on Education (ACE) and nineteen other higher education associations to the U.S. Court of Appeals for the First Circuit in support of Sacred Heart University in the tuition claw-back case, DeGiacomo v. Sacred Heart University, Inc. The key issue in the case asks whether a bankruptcy trustee can recover tuition and other education-related payments made to institutions by parents on behalf of their children. Trustees claim that because the parents were insolvent at the time they made the payments and received less than “reasonably equivalent value” for their children’s education, the payments were fraudulent. Amici argue that the trustees have misread the relevant bankruptcy statute and “ignored the very real direct and indirect value that parents receive when they pay for their child’s college education.” 

7/21/2017
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