More On The Charleston Law Sale

The article says that Infilaw is not seeking to acquire the faculty members' contracts. I guess that means the faculty will all lose their jobs.

Saw the same line in the article about Infilaw not acquiring faculty's contracts. If true it looks like Infilaw is doing the deal as an asset purchase, but not purchasing the faculty's contracts. I guess the faculty can fight with the owners of the school about continuing to get paid under their contracts after the ABA rubber stamps a big "APPROVED" on the sale transaction.

As I read more articles and blog posts about InfiLaw's operations, I become more opposed to their continued accreditation. Their tuitions seem disproportionate to their quality, their schools have poor graduate job placement, and their administrations seem antagonistic to academic freedom.

If any schools can be considered predatory, it is these. At what point does the ABA take action?

ConcernedProf,

Given that the ABA appointed an Infilaw board member to chair the Task Force on the Financing of Legal Education, I wouldn't hold my breath on it taking action against any Infilaw schools.

"If any schools can be considered predatory, it is these. At what point does the ABA take action?"

When the fat envelopes stop coming.

It's a combination of (1) what Former Editor said and (2) the ABA's fear of losing a second antitrust suit. Losing the first made them pretty toothless, but not completely. Losing a second would completely eviscerate what little capability they still have.

ATLprof,

Your point about the antitrust suit is a good one. I have to admit that I don't know as much as I should about it. Can anyone give a general description of the settlement agreement and what it does to prevent more aggressive quality-control measures by the ABA? Thanks.

I've tried multiple times to respond to your request, but my comments are not posting. It may be because I have been including multiple links. So this time I am trying to post by copy and pasting the DOJ's press release about the consent decree from 1995:

JUSTICE DEPARTMENT AND AMERICAN BAR ASSOCIATION RESOLVE CHARGES THAT THE ABA'S PROCESS FOR ACCREDITING LAW SCHOOLS WAS MISUSED
WASHINGTON, D.C. — The Department of Justice and the American Bar Association today resolved charges that the ABA process for accrediting law schools had been misused to inflate faculty salaries and benefits.

The Antitrust Division filed a civil lawsuit and settlement in U.S. District Court in Washington, D.C., alleging that the ABA used its power as the law school accrediting agency to protect law faculties' economic interests and working conditions.

Anne K. Bingaman, Assistant Attorney General in charge of the Antitrust Division, said, "The ABA's accreditation process required that universities raise salaries to artificially- inflated levels, and meet other costly accreditation requirements that had little to do with the quality of the legal education they provided. The settlement reached today stops this anticompetitive conduct."

Under today's proposed settlement, the ABA would be prohibited from:

– Fixing faculty salaries;
– Refusing to accredit schools simply because they are for-profit; and
– Refusing to allow ABA-approved law schools to accept credits for classes at schools that are state-accredited but not ABA-approved.

The settlement also:

– Establishes a special committee to determine if ABA accreditation requirements in six other areas should be revised– student to faculty ratios, teaching loads, sabbaticals, bar preparation courses, facilities, and other resources.
– Opens up the ABA accreditation process so that it is no longer controlled by legal faculty who benefit from requiring better pay and working conditions.

"The powerful status of the ABA does not insulate it from the antitrust laws," said Bingaman. "The Antitrust Division has sued many professional trade associations, which, like the ABA, have violated the antitrust laws. Lawyers must keep their own house in order as well."

The complaint charges that the ABA's accreditation process had the effect of pressuring law schools to raise salaries to the national or regional median. The Department said by pressuring schools to pay the median salary, the ABA kept raising the target that schools had to meet.

About 90 percent of the ABA's Section of Legal Education members are law faculty. The section is responsible for the law school accreditation program, which has operated without adequate oversight. The complaint alleges that the lack of oversight has led to abuses in the accreditation process, leading to an undue focus on guild concerns rather than quality education.

Through the process established by the consent decree, the ABA will work in the months ahead to revise its accreditation standards to address the problems identified in the government's complaint. Bingaman said, "We are pleased that the ABA has acted promptly and responsibly to address these issues, so that its important role in accrediting the nation's law schools can be performed appropriately and effectively."

The ABA, which is headquartered in Chicago, is the world's largest professional association for lawyers. There are currently 177 ABA-approved law schools.

To become effective, the consent decree must be approved by the court following a 60-day comment period as required by the Antitrust Procedures and Penalties Act. If the consent decree is approved by the court, it will settle the suit.

95-363

I tried to post a comment as well, but it hasn't been published.

Note that more recently the ABA had to acknowledge that it had violated the consent decree and had to pay a six figure fine. I imagine that after being stung twice the ABA is not eager to push the envelope.

And it may be worried that if they draw a line about schools that — to use ConcernedProf's words — have "tuitions [] disproportionate to their quality" and have "poor graduate job placement," the ABA would not be limiting its crackdown to for-profit schools.

I'm not convinced the ABA, or portions of it, are worried about hitting non-profit schools.

I honestly believe that when the ABA adopted its number based bar passage requirements, that it thought it was going to be able to withdraw accreditation from a number of schools.

Then it got zero. So the ABA (more accurately, the Council) then did two things:

1. The ABA "altered" its interpretation of those rules to yank La Verne's accreditation even when it looked like it met one of the standards. The standards are worded as a school haven got meet one of the two. La Verne met one but not the other. The ABA then said they could find a school not in compliance with the standard even if it met one of the standards. That interpretation was quite a surprise (though a lot of good arguments support it and its application).

2. The ABA started talking about raising the numbers that didn't catch any schools. I suspect they stopped that pursuit, at least in part, because after spending years coming up with the "proper" levels, they couldn't justify raising them a few years later with anything but "we needed to raise them to get a few schools."

I think the ABA (or portions of the Council) would like to withdraw accreditation from a number of schools; they just don't have much of an ability to do so given the context and content of the consent decree.

Back to the Charleston sale:

I read the line about InfiLaw acquiring the assets but not the faculty contracts as a statement by the faculty aimed squarely at the ABA. It seems they pointed that out to create doubt in the ABA as to what the ABA were approving or not approving.

As for what would happen if InfiLaw took over, I would expect them to offer new/different contracts to most existing Charleston faculty, the biggest goal of which would be switching whatever tenure form Charleston currently has to the InfiLaw "not-tenure-but-we'll-call-it-tenure" form of contracts.

"Your point about the antitrust suit is a good one."

An excellent one.

"I read the line about InfiLaw acquiring the assets but not the faculty contracts as a statement by the faculty aimed squarely at the ABA. It seems they pointed that out to create doubt in the ABA as to what the ABA were approving or not approving."

Or it is a big gun aimed at the faculty, to let them know what the corporation will do if the faculty don't knuckle under. If I were InfiLaw, I'd use that threat to make them sign contracts which would put them on an easily-fireable basis.

It is double talk. The faculty contracts are not assets, but liabilities. If this were a business, it would not be allowed to sell assets and then distribute the proceeds and avoid paying the contracts. As to the length of the contract, if the professors are tenured, one can use actuary tables to estimate the period.

Good point. Is there any slimy way to get around that?

Barry, yes exactly, about the big gun. That's why it happened that way, if indeed we have the whole picture (see Anon123's comment).

I was referring to why it was mentioned in the article, who told the journalists about it. The faculty are the ones who would want to publicize it. InfiLaw would not want it publicized.

Anon123: "It is double talk. The faculty contracts are not assets, but liabilities. If this were a business, it would not be allowed to sell assets and then distribute the proceeds and avoid paying the contracts. As to the length of the contract, if the professors are tenured, one can use actuary tables to estimate the period."

If that were true, hostile takeovers would be rare. ****I don't know the limits***, but it is quite possible to transfer assets between corporate entities, and then allow the one holding the debts to go bankrupt.

Barry, the system is not perfect, but creditors can and do enforce their rights.

And debtors can and do slide out from debts. Think of hostile takeover artists.

Barry, you have said hostile takeover twice. Can you name some specifically where creditors were not paid and assets went to equity holders?

ATLProf, thank you for the information you posted. Very helpful.

"Barry, you have said hostile takeover twice. Can you name some specifically where creditors were not paid and assets went to equity holders?"

The equity holders get wiped out, of course (can you figure out the trick?)

Question – what happens if Charleston Law School sold their buildings and intellectual property to Infilaw? 'Charleton Law School' would still exist.

BTW, that's a serious question – what would happen?

I would think they would have to acquire more than that (buildings and intellectual property), since the most valuable thing Charleston Law School owns is its ABA accreditation and that is based on more than that. But perhaps that is what the ABA is evaluating as a part of its "major change" evaluation. Which goes back to my thought that the publicizing of the questions about not taking over CLS' faculty contracts was done by existing faculty as a way to force the question before the ABA.

Thanks! The trick is to play corporate entity shell games. IIRC Mitt Romney did this, and there was a campaign ad about it (some company was left holding all debts and no assets).

When I asked for a reference as to a company that had its assets stripped, I was hoping for more than, well there was a campaign ad about it. There is a difference between companies that go bankrupt after being acquired and those that are bankrupt at the time of acquisition. CSL may be left insolvent at the time it pays funds out to its owners, after the sale.

" CSL may be left insolvent at the time it pays funds out to its owners, after the sale."

I think that you mean 'debtors'. And that's the whole point.

No, I meant owners. A company is allowed to pay debtors (although it should be paying secured creditors first). It is when it pays owners before creditors there is a problem.

A company could always pay debtors, but I imagine that they'll want to collect from them, instead :0

And I agree with your second statement. The question is – what happens if 'Charleston Law School' has no assets, but 'Infilaw – Charleston Campus', a totally separate firm, does?