Judge says students must find new lawyers in class action over US college financial aid

By David Thomas and Mike Scarcella

March 31 (Reuters) - A proposed antitrust class action against a group of elite U.S. universities was upended at least temporarily on Tuesday, when a federal judge in Chicago said he had been misled and that the plaintiffs must find new lawyers to lead their legal team.

U.S. District Judge Matthew Kennelly said he would certify the class of more than 200,000 current and former college students only if new attorneys are brought in to lead the case, which accuses top universities of favoring wealthy applicants for financial aid.

The plaintiffs have already secured more than $300 million in settlements in the case, which is set to go to trial in November.

Kennelly gave the plaintiffs' lawyers at law firms Berger Montague and Freedman Normand Friedland 21 days to find an alternate lead counsel after finding a third firm, Gilbert Litigators and Counselors, misled the court in its requests for attorney fees.

"If this is done, and the new counsel is shown to be adequate, then the court will grant the motion for class certification and appoint the new counsel as the lead, with FNF and Berger as co-counsel," Kennelly wrote in his 62-page ruling. Otherwise "the balance will tip the other way, and the court will deny the motion for class certification," he said.

The judge scheduled a hearing for next month.

Kennelly found that the Gilbert firm misled the court when it asserted in its briefs seeking attorney fees that its work was on a "wholly contingent" basis and its expenses were "unreimbursed." This was false because GLC had a litigation financing agreement that provided the firm with $14 million in advanced funding, Kennelly said.

Berger Montague and Freedman Normand did not disavow or correct GLC's filings, Kennelly said, writing that the two firms "helped pull the wool over the court's eyes."

Eric Cramer, the chairman of Berger Montague, and Ted Normand, a founding partner at Freedman Normand, both declined to comment. Robert Gilbert, the managing partner of GLC, referred Reuters to his filing earlier this month in which he apologized and said he did not intend to mislead the court.

Cramer and Normand in a joint filing earlier this month said they also did not intend to mislead the court, but that their attorney-fee filings "unintentionally left the court with an inaccurate impression with respect to the financial risks" taken by GLC due to the litigation funding it received.

Kennelly said he had no issue with litigation financing or the lawyers' requested fees in principle. But he said the episode had "impaired" the necessary trust between the court and the class lawyers.

Kennelly said GLC could exit the case altogether, which the firm had suggested if it could not stay on in a supporting role. Berger Montague and Freedman Normand in a filing last month said they "would work to facilitate a transition to new counsel" if required by the judge.

The lawsuit accuses 17 prominent colleges and universities of violating U.S. antitrust law by breaching a pledge not to consider students' finances in making admissions decisions. Twelve of the original defendants in the case, including Vanderbilt, Northwestern, Dartmouth and Columbia, have agreed to pay nearly $320 million to settle claims against them. All the defendants, including those that have settled, have denied any wrongdoing.

The five remaining defendants — Cornell, University of Pennsylvania, MIT, Georgetown and Notre Dame — have argued that the class should not be certified. They argued in a filing earlier this month that all of the plaintiffs' attorneys should be kicked off the case. The schools said the three firms have an agreement to share fees in this case, and cutting just GLC out of the case could lead to future disputes over those fees.

"So long as any of the attorneys who misled the court remain in this case, all stand to benefit at the proposed class’s expense," the schools argued in a March 19 filing.

Attorneys for the five schools did not immediately respond to a request for comment.