Parts of the federal lawsuit against Downtown-based Education Management Corp., alleging that the for-profit post-secondary education provider used an illegal recruiter compensation system, will continue, a judge decided Friday.
"This is a massive and complex case," U.S. District Judge Terrence F. McVerry wrote at the end of a 50-page opinion. "It is certainly possible that EDMC has properly compensated its [recruiters] in compliance with all government requirements. Indeed, the Court has concluded that claims based on EDMC's Compensation Plan 'as written' must be dismissed.
"However, the Court concludes that the claims based on the Plan 'as implemented' will not be dismissed. At this stage of the proceedings, the Court merely concludes that Plaintiffs' allegations of a company-wide fraud, viewed in the light most favorable to Plaintiffs and assumed to be true, are cognizable.
"Plaintiffs are entitled to take discovery in an effort to prove these allegations."
Federal laws have long barred pay plans for college recruiters "based solely on the number of students recruited." Two whistleblowers, the Department of Justice, five states and the District of Columbia have said that EDMC broke that law. They want for-profit EDMC, with 106 facilities and around 150,000 students nationwide, to pay back billions of dollars in government aid for students.
EDMC had filed a motion to dismiss the case, arguing that its compensation system was based only partly on the number of new students that a recruiter enrolled, so it didn't violate rules against pay plans based "solely" on enrollments. The system also took into account recruiter qualities including "professionalism, customer service, and business practices and ethics," EDMC has written.
Rich Lord: firstname.lastname@example.org or 412-263-1542. First Published May 11, 2012 4:30 PM