On February 20, 2024, the California Court of Appeal largely affirmed an eight-figure judgment against Ashford University (“Ashford”), an on-line, for-profit college, and its parent company, Zovio, Inc. (formerly Bridgepoint Education) for violations based on false and misleading statements to prospective students. Ashford and Zovio had not challenged the trial court’s liability determination, but sought review and reduction of the penalty awarded in that action. The Court of Appeal largely upheld the award, but reduced the original $22,375,782 judgment by $933,453, leaving Ashford and Zovio liable for $21,442,329.

The underlying action commenced as an enforcement action filed by the California Attorney General in 2017. In that complaint, the CA AG alleged that Ashford and Zovio had violated California’s Unfair Competition Law, Bus, & Prof. Code § 17200 et seq. (“UCL”) and False Advertising Law, Bus, & Prof. Code § 17500 et seq. (“FAL”) by making numerous misrepresentations to prospective students regarding the cost of attendance, availability of financial aid, efficacy of programs to prepare students for careers in various professions, and the ability to transfer academic credits. The CA AG also alleged violations of the UCL and FAL related to unfair, unlawful and fraudulent billing and collection practices. The State sought injunctive relief, restitution, and civil money penalties of $2,500 for each ACL violation and $2,500 for each FAL violation.

As discussed in the appellate court’s factual summary, Ashford’s former parent, Zovio, is an education technology services company that provides student enrollment services to higher education institutions. Zovio, which had never offered degree programs, purchased a small accredited campus-based religious university in Iowa in 2005, renamed it Ashford, and transformed it into an online institution. Ashford had more than 80,000 students at its peak and a bachelor’s degree from Ashford typically cost $40,000 to $60,000 with the majority of students paying with Title IV loans, income-based grants, and G.I. Bill funds. Zovio sold Ashford in December 2020 and it is now known as the University of Arizona Global Campus.

In a lengthy decision issued after a bench trial in 2021, the trial court found that defendants created a high-pressure, fear-based culture in the Ashford admissions department which emphasized enrollment numbers over accuracy of information provided to prospective students. According to the trial court, the defendants:

• Falsely promised prospective students that Ashford degrees qualified students for teaching careers, ignoring the fact that students would need to obtain a license by completing a state-approved teaching program.
• Misled prospective students that Ashford degrees qualified them for “helping careers” – nursing, social work, and drug and alcohol counseling – which also required state licensure or certification.
• Misled prospective students about financial aid and the costs that aid would cover.
• Downplayed future debt, including deceptively representing future loan payments at a fraction of their potential size.
• Misstated federal financial aid rules and requirements.
• Misled prospective students on the feasibility and cost of taking two classes simultaneously or “doubling up” on class credits rather than taking one class at a time, which was standard.
• Understated the cost of attendance in a number of ways, including leading students to believe that tuition would be their only cost and inaccurately comparing their pricing to other schools.
• Misrepresented the pace and time commitment for completing a degree. Unlike a traditional four year program, Ashland students needed to take classes for 50 weeks a year – with no summer break – to earn 30 credits.
• Misled prospective students about the ability to transfer credits in and out of Ashford.

In reducing the judgment by approximately $900,000, the appellate court found that some FAL violations fell outside of the applicable statute of limitations, but that the trial court did not otherwise err in its determination of the penalty.

In addition to the penalty, the Department of Education announced in August 2023, after the trial decision, that it approved $72 million in Borrower Defense to Repayment discharges for more than 2.300 Ashford students who applied for loan relief. Under the Borrower Defense program, borrowers can apply for a discharge of certain federal student loans if the school that they attended engaged in certain misconduct, including untruthful or misleading statements to induce enrollment and deceptive recruitment tactics.

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