CCNH Class Action Suit Filed

[Albert Hidel]

Class action lawsuit filed in US District Court, Northern District of Alabama on November 5, 2010 as Case No CV-10-HGD-2990-S.

Quote:CCNH Lawsuit

In November 2010, a class action lawsuit was filed in the United States District Court for the Northern District of Alabama in Birmingham, seeking recoveries on behalf of thousands of adults enrolled in prepaid distance education programs at Clayton College of Natural Health, Inc. The lawsuit comes in the wake of CCNH’s announcement in July 2010 that it was suddenly closing the school and its distance education programs after more than 20 years of operation.

The lawsuit alleges that at the time of the closing, CCNH had already collected tens of millions of dollars in tuition from Plaintiffs and a class of similarly situated persons for programs that CCNH summarily stopped providing. After the abrupt termination of its distance education programs, CCNH failed to refund tuition, according to the lawsuit.

Plaintiffs’ co-counsel in the lawsuit are Thomas H. Howlett and Dean M. Googasian of The Googasian Firm, P.C., who may be contacted by calling 1-877-540-8333, or by clicking here or sending an e-mail to ccnhlawsuit@googasian.com. Joining The Googasian Firm in pursuit of the lawsuit is Plaintiffs’counsel, the Birmingham, Alabama-based law firm, Whatley, Drake & Kallas, LLC.

Defendants in the lawsuit include CCNH and Magnolia Corporate Services, Inc., as well as four individuals, Lloyd Clayton, Jeff Goin, William Fishburne, and Kay Channell.

According to the lawsuit, CCNH marketed its programs as affording students the ability to learn and pursue degree and certificate programs with flexibility as to the time within which they were completed. In its 2008 catalog, CCNH stated that, “At CCNH, the self-paced programs are designed to fit your schedule, so that any part of the day becomes study time and assignments may be submitted at your convenience. In order to help you organize your studies and ‘stay on track,’ degree programs are divided into phases. Although you must complete the phases of your program sequentially, there is no requirement that you take every course in the order it appears in the phase. It is our expectation that you will complete all phases of each individual degree program within five years. At CCNH, you enroll, study, and progress on your schedule, not ours.” But the sudden closure of CCNH precludes these students from completing the distance education programs for which they had paid and devoted considerable time and effort, the lawsuit alleges.

If you have a concern about experiences with CCNH or Magnolia, click here to share these concerns.

The lawsuit asserts breach of fiduciary duty, negligence, and other claims, and seeks compensation for the tuition amounts paid for programs that are no longer available and for Plaintiffs’ loss of time and opportunity, among other damages. A copy of the lawsuit can be found by clicking here.

In accordance with Alabama State Bar requirements, no representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers. ARPC 7.2 (e).

  CCNH_Complaint.pdf (Size: 1,013.84 KB / Downloads: 6)

[RespectableGent]

Do these students want refunds for services already rendered, or for the remaining unrendered services?

If the students want refunds for services already rendered, then their demands are absurd beyond the extreme. Should the Art Institude of San Francisco provide refunds for a student's full tuition if the school's building burns down in a fire, two years into the student's program? No. The student was provided with two years of education regardless of whether or not they received a piece of paper for it or their inability to transfer credits.

If the students want refunds for unrendered services, then that is a reasonable request.

However, CCNH did mention that they were working with several colleges to arrange a teach-out for its students. Perhaps they are using the student's remaining tuition towards that, to pay for the remaining courses for their students.

[Albert Hidel]

RespectableGent Wrote:If the students want refunds for unrendered services, then that is a reasonable request.

You are correct, RG.  As I understand it, many of the students paid for their programs in full in advance.  Thus CCNH holds money it hasn't earned.  The complaint pegs this amount at "tens of millions."

In fact, it is said that DETC directing CCNH to stop the practice of accepting full payment in advance is what precipitated the closing of CCNH.  See related thread.

[Winston Smith]

Quote:Clayton College officials say they're not liable for lost tuition
Published: Tuesday, February 22, 2011, 9:30 AM
By Stan Diel -- The Birmingham News


The Clayton College of Natural Healing's website showed its 'virtual campus' as a tree-lined traditional campus. It actually was housed on the third floor of this southside office building. (Philip Barr -- The Birmingham News)

Former board members and administrators of the defunct Clayton College of Natural Health and an affiliated corporation should be dismissed as defendants in a lawsuit against the school because students had contracts with the college, not with them individually, a court filing says.

Four former students filed suit against the closed correspondence school in November, claiming school officials improperly kept $5 million in tuition from more than 5,000 students when it shut its doors last summer.

The suit, which seeks class action status in U.S. District Court's Northern District of Alabama, names as defendants the school, the affiliated Magnolia Corporate Services Inc. and four individuals: school founder Lloyd Clayton, president Jeff Goin, administrator Kay Channell and attorney William Fishburne.

But in a filing made earlier this month, the defense says the four individuals can't be held liable for the students' lost money.

"Plaintiffs have not, and indeed cannot in good faith, allege that there was any contract between the individual defendants and the plaintiffs," the motion says. " ... the complaint is, in essence, a dispute between CCNH and its former students."

Efforts to reach attorneys representing the plaintiffs and the defendants were not successful Monday.

The unaccredited school, which offered undergraduate, graduate and doctoral degrees in holistic health and nutrition, closed in July. School officials said at the time that the closing was a result of the recession and was not related to a new state law requiring all degree-granting institutions in Alabama to be accredited by an agency recognized by the U.S. Department of Education.

The school had faced criticism over its academic standards and had been placed on watch lists of unaccredited schools maintained by several states. Retired North Carolina psychiatrist Stephen Barrett, who maintains the website Quackwatch.com, called the school one of the most prolific producers of questionable degrees in the country.

After Clayton College closed, administrators said an undetermined number of students who were nearest completion would be able to finish their studies. It's not clear how many continued their course work.

Court filings so far have shed little light on the inner workings of the private college, which was headquartered on Birmingham's Southside, just blocks from the Five Points South fountain. According to filings:

The school's revenue from tuition was about $11.6 million in 2007.

The amount of money at issue in the suit exceeds $5 million.

The college was issued a two-year license by the Alabama Department of Postsecondary Education in January 2009, conditioned upon its continued effort to win accreditation. It had an application pending with the Distance Education and Training Council, a federally recognized accrediting agency, at the time it closed.

Another unaccredited school founded in Birmingham by Lloyd Clayton -- Chadwick University -- relocated to New Mexico "under the ownership and/or management of Jeff Goin," after its license was revoked by Alabama regulators in 2008, according to a defense filing. Goin, one of the four named individual defendants, was the last president of Clayton College.

A Chadwick University Alumni Association website indicates that school no longer exists. The alumni website indicates Chadwick was accredited by the International Association of Universities and Schools and separately by the World Association of Universities and Colleges. Neither of those organizations are federally recognized accrediting agencies, according to U.S. Department of Education records.

The named plaintiffs in the Clayton College suit are Suzanne Goldberg, Juli Madacey, Michelle Reeves and Krista Walsh.

[Virtual Bison]

I see a similar situation at the school I attended. This school voluntarily closed after failing to become accredited and now people are pissed.

I myself do not want to get my tuition paid back but I do want to be able to have transcripts and copies of diplomas available. And I hear this a lot.

This is something that these dingbats do not consider when they close down legitimate, but unaccredited schools. Its the students and graduates who loose.

[Albert Hidel]

Quote:Clayton College former students say tuition money is missing
Published: Saturday, April 02, 2011, 5:30 AM
By Stan Diel -- The Birmingham News

Tens of millions of dollars from advance tuition payments remain unaccounted for in the wake of the closing of Clayton College of Natural Health, according to a filing in a lawsuit over the privately-owned correspondence school's demise.

In documents filed in U.S. District Court last week, four former students claim that top college administrators paid themselves as much as $20,000 a month each from advance tuition funds that should have been reserved to pay for future courses.

"Thousands of students from around the country have collectively lost tens of millions of dollars ... the money has inexplicably disappeared," the former students allege in the suit, which seeks class-action status.

The plaintiffs claim that more than 5,000 students had paid their tuition in advance but not yet graduated when the school closed in July of last year. The school continued to enroll new students "up to and including the day" its employees were told the school would close, the filing indicates.

Dan Sparks, an attorney representing the defunct school and four former administrators named as defendants, said the allegations are without merit.

"There's no fact that supports that. It's a mere unfounded allegation," he said of the claim that "tens of millions" of dollars is missing. "It's just inaccurate. The losses about which they complain were subsumed by operational expenses."

The unaccredited Internet correspondence school, which was based in Southside, offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness. According to the filing made last week, students paid tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs.

The school had faced criticism over its academic standards, appearing on several states' "watch lists" for unaccredited schools and being called one of the nation's most prolific producers of questionable degrees by retired North Carolina psychiatrist Stephen Barrett, who maintains the website Quackwatch.com.

The closure followed the passage of a new state law requiring that degree-granting institutions in Alabama be accredited by an agency recognized by the U.S. Department of Education. College officials said at the time that the closure was a result of the recession and an accreditation application was pending.

'Disingenuous'

The four former students filed suit in November, and in February the former administrators asked the court to dismiss the suit, arguing that the students had contracts with the college, not with them individually.

In the response filed last week the students argue that the administrators' salaries were paid using advance tuition money that should have been spent on classes.

"They were personally receiving money as purported compensation that actually was advance tuition" and "converted such money as if it was their own," the filing indicates. "One or more of the ... defendants received at least $20,000 per month in compensation."

Sparks called the allegation that tuition revenue was wrongly spent on salaries "disingenuous."

"The bulk of the income of the college was advance tuition funds, as is the case with every educational institution," he said. "Under (that) logic, the president of the University of Alabama is compensated wrongly with advance tuition funds."

Named as defendants are four former members of the board of directors of Magnolia Corporate Services Inc., which was affiliated with the college. Board member Lloyd Clayton also was founder of the school and had served as president or chief executive officer, the filing indicates. Board member Jeff Goin also served as president or CEO of the school, Kay Channell served as CEO or chief operating officer, and board member William Fishburne was an attorney for both Magnolia and the college, the filing said.

The named plaintiffs in the suit are Suzanne Goldberg, Juli Madacey, Michelle Reeves and Krista Walsh, former students from Michigan, Virginia and Massachusetts.

[Armando Ramos]

Quote:Insurer for Clayton College of Natural Health says defunct school owes $100,000
Published: Saturday, April 09, 2011, 8:00 AM
Updated: Tuesday, April 12, 2011, 12:54 PM

By Stan Diel -- The Birmingham News

BIRMINGHAM, Alabama - A Wisconsin insurance company that provided tuition reimbursement insurance for the defunct Clayton College of Natural Health this week asked to intervene in a lawsuit against the college, claiming the school hasn't kept a promise to repay the company for losses related to the policy.

Birmingham's Clayton College had a total of $50,000 worth of tuition reimbursement insurance with Platte River Insurance Co. for students "suffering loss as a result of a breach of contract, fraud or misrepresentation ... or for any violation of any obligation due a student," according to the filing and a performance bond included in the court record.

But since the college closed unexpectedly last July more than 800 former students have filed claims with the insurance company, the insurer said in the U.S. District Court filing. "The total amount of the claims far exceeds the ... bond," the court filing indicates.

The college and the insurance company also had an indemnity agreement, which required the college to reimburse the insurance company for any losses related to the policy. According to Platte River's court filing, Clayton College contracted with the insurer to provide the tuition reimbursement insurance because it's required under Alabama law.

The insurer's filing asks the court to force the college and its founder, Lloyd Clayton, to pay it $100,000 to compensate it for current and expected claims. The lawsuit in which the insurer seeks to intervene was brought by four former students who claim about 5,000 students have lost "tens of millions" of dollars in tuition that can't be accounted for. The suit, which names the college and four former administrators as defendants, seeks class action status.

Efforts to reach attorneys representing the insurance company were not successful on Friday. Dan Sparks, an attorney representing the college and its former administrators, declined to comment. Sparks has said in the past that the tuition money in question went toward operating expenses at the school.

In addition to compelling payment of $100,000, the filing asks the court to:

Require the college and Clayton to account for all of their assets from the past five years.

Give the insurance company access to all financial records of the college and Clayton.

Place a lien on assets belonging to the college and Clayton.

History
The unaccredited, Southside-based Internet correspondence school offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness with students paying tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs, according to the students' lawsuit. The private school had been on several state's "watch" lists for unaccredited schools, and had a pending application for accreditation with a U.S. Department of Education-approved accrediting agency at the time it closed.

College officials said at the time that the closing was a result of the poor economy, and not a new state law requiring degree-granting institutions to be accredited.

Named as defendants are Clayton and three other former members of the board of directors of Magnolia Corporate Services Inc., which was affiliated with the college. Board member Jeff Goin also served as president or CEO of the school, Kay Channell served as CEO or chief operating officer, and board member William Fishburne was an attorney for both Magnolia and the college, the filing said.

The named plaintiffs in the suit are Suzanne Goldberg, Juli Madacey, Michelle Reeves and Krista Walsh, former students from Michigan, Virginia and Massachusetts.

[WilliamW]

Quote:Tuition insurer for defunct Clayton College wants to be paid first

Published: Saturday, April 30, 2011, 8:00 AM

By Stan Diel -- The Birmingham News

A Wisconsin insurance company that provided tuition reimbursement insurance for the defunct Clayton College of Natural Health argued in a court filing Friday that it should be first in line -- ahead of students -- to claim a share of the school's assets.

The private, unaccredited correspondence school based on Birmingham's Southside went out of business last July. A lawsuit filed by former students claims that "tens of millions" of dollars in tuition money is missing, and that about 5,000 students forfeited their tuition when the school closed. An attorney representing the school and former administrators has denied that any funds are missing.

Platte River Insurance Co., which provided state-mandated insurance guaranteeing students' tuition, argued in a court filing Friday that it is "a surety, not a common creditor or insurer," and that its right to recover losses "has priority over any recovery the Plaintiffs may be awarded in the future." A "surety" is an entity that is responsible for the payment of another's debt.

The insurer has asked the court to allow it to intervene in the students' lawsuit, arguing that it is owed $100,000 for the cost of claims filed by students and for attorneys fees. The college and the insurance company had an indemnity agreement which required the college to reimburse the insurance company for any losses related to the policy.

Efforts to reach an attorney representing the insurance company and the plaintiffs, four former students, were not successful Friday. The lawsuit, in U.S. District Court for the Northern District of Alabama, seeks class action status.

The school offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness with students paying tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs, according to the students' lawsuit.

[Albert Hidel]

Quote:Clayton College insurer's attempt to intervene denied
Published: Wednesday, June 29, 2011, 9:00 AM
By Stan Diel -- The Birmingham News

A Wisconsin insurance company seeking assets of the defunct Clayton College of Natural Health will not be allowed to cut in line ahead of former students, at least not yet.

A federal judge this week denied a request from Platte River Insurance Co. to intervene in the case, in which former students sued the Birmingham-based correspondence school claiming "tens of millions" of dollars in tuition money was unaccounted for after it closed last summer.

Platte River Insurance provided Clayton College with state-mandated tuition reimbursement insurance, but had an indemnity agreement that made the school liable if anyone ever filed claims. In a motion filed in April the insurance company argued that its right to recover losses under that agreement "has priority over any recovery the Plaintiffs may be awarded in the future."

The insurer sought $100,000 for insurance claims and attorneys fees. The school's insurance policy provided for a maximum total of $50,000 in claims, according to court records.

In a ruling filed Monday, U.S. Magistrate Judge Harwell Davis III said Platte River didn't meet the legal requirements to intervene in the suit but can file a separate action against the college or it can file a similar motion after the court determines whether the case is to be certified as a class action. The suit, brought in the U.S. District Court's Northern District of Alabama by four former students, claims that about 5,000 students forfeited their tuition when the school closed.

In the Monday ruling Davis noted that, even if a class action is approved and the class numbers 800 students, each student's share of the insurance proceeds "would be very small."

An attorney representing the school and former administrators has denied that any funds are missing. Efforts to reach a representative of Platte River were not successful.

The unaccredited school, which closed last July, offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness with students paying tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs, according to the students' lawsuit.

The school had been on several states' "watch lists" for schools with questionable academic standards. At the time of its closing administrators said it was a victim of the recession, and the closing was not related to a new Alabama law requiring degree-granting institutions to be accredited by an agency recognized by the U.S. Department of Education.

Want to know more?

Judge's order denying Platte River Insurance Co.

[Albert Hidel]

Quote:Clayton College of Natural Health board targeted in Birmingham fraud case
Published: Friday, August 12, 2011, 6:15 AM
By Stan Diel -- The Birmingham News

An unaccredited Birmingham correspondence school that closed last year was run not by its own board but by the board of a parent company whose owner improperly took as much as $1 million a year in school funds, former students claim in new court filings.

An attorney representing the former administrators of the school, Clayton College of Natural Health, denied the allegations, saying they are not supported by evidence.

In a U.S. District Court filing this week, attorneys for former students asked to amend a lawsuit over the school's closing, arguing that in discovery they determined that the board of directors of parent company Magnolia Corporate Services Inc. "made all key decisions" for the college.

The college's administrators "reported directly to the Magnolia board, not to CCNH's board, which, as a practical matter, did not exist," the filing claims.

The filing alleges that Clayton College founder Lloyd Clayton, who also owned Magnolia Corporate Services, was paid more than $1 million a year from funds that should have been reserved for the school's operations.

Dan Sparks, a Birmingham attorney representing the school and its former officers, said the lawsuit's allegations are false and the students are victims of the recession, not malfeasance on the part of administrators.

"There are no facts in support of the allegations and it's false," Sparks said. "We're in a very bad economy and businesses are going out of business every day. Schools are not exempt."

The Internet correspondence school, which offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness, closed last July with no warning. Administrators said at the time that the closing was a result of the recession and not a new state law requiring degree-granting institutions to be accredited by an agency recognized by the U.S. Department of Education. The school had an application for accreditation pending.

Four former students filed suit in November, alleging that more than 5,000 students are owed tens of millions of dollars in advance tuition payments for which the college cannot account, and that letters from students seeking refunds or more information go to a post office box where they are "largely ignored." Students typically paid tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs.

The plaintiffs in the class, should the suit be granted class action status, are mostly in other states because the school enrolled no Alabama students under the terms of an agreement it had with the state, the suit indicates.

In filings this week the students' attorneys asked the U.S. District Court for the Northern District of Alabama to allow them to amend the lawsuit with the new allegations, saying they had obtained more than 10,000 pages of documents during discovery. Discovery is scheduled to continue through November. The court has not ruled on the request.