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Career Education reaches settlement in 2008 class-action suit

Career Education Corp. on Feb. 2 signed a settlement agreement related to a class-action lawsuit filed March 2008 involving the company and its subsidiary Western Culinary Institute Ltd., according to a Feb. 6 SEC filing.

In the March 2008 case, students of the now-closed World Culinary Institute alleged that the institution advertised itself as a prestigious school but offered low-quality materials and provided training that qualified graduates only for entry-level and low-paid positions, food news outlet Eater reported Feb. 6. The students reportedly also alleged that Career Education pushed them to take out predatory loans with Sallie May Bank because the U.S. education services company had a secret agreement with the loan provider that overcharged students by 44%.

Under the terms of the settlement, Career Education will pay 1,169 settlement class members after they return a completed and signed claim form within 90 days of mailing of the form. Each settlement class member who returns the form will receive 44% of the total amount charged to them by World Culinary Institute for tuition, books and fees, excluding institutional grants, scholarships, refunds and unpaid charges. The 1,169 settlement class members are composed of individuals who enrolled in the institute primarily from 2006-2007.

The company said its liability pursuant to the settlement, which is subject to final court approval, will depend on the number of settlement class members return valid forms. It estimates the amount to reach $2.8 million and has recorded a reserve of that amount for the quarter ended Dec. 31, 2017. However, if all members return valid forms, Career Education said the total settlement amount could be $14 million.

The agreement also says that the court will determine the amount of lawyers' fees and costs payable by Career Education to counsel for plaintiffs, but all parties have agreed that the amount will fall in the range of $3.75 million to $8 million. The education services provider recorded a reserve of $3.75 million related to this matter for the quarter ended Dec. 31, 2017.