A local for-profit college accused by former students of being “a sham” last week ended a two-year legal battle in federal court.
The Richmond School of Health and Technology, now operating as Chester Career College, agreed to pay $5 million to settle a class action lawsuit that alleged the school used deceptive practices to attract students while not providing adequate education.
The school also agreed to requirements for compiling and making available data about the “success or lack of success its students have in obtaining certifications and jobs in their fields,” said Glenn Schlactus, an attorney with the law firm Relman, Dane & Colfax, which represented a class of the school’s former students.
“The idea is there will be greater transparency and people will have more information with which to decide to enroll,” he said. “Hopefully the school will provide a better education in the future.”
The case, filed in U.S. District Court in Richmond in 2011, claimed RSHT carried out a scheme that targeted black people in low-income areas of Richmond in an attempt to profit from federal financial aid dollars. It alleged breach of contract, fraudulent inducement and violations of the Equal Credit Opportunity Act and the Virginia Consumer Protection Act.
The school, which continues to operate at its classroom building at 751 West Hundred Road, advertised classes for those interested in careers as surgical technicians, medical assistants, massage therapists and more.
It charged students $10,000 to $20,000 for tuition, which was often paid for with financial aid, according to the suit. That aid totaled more than $5 million a year, or 86 percent of the school’s revenue, the suit claimed.
“RSHT treats the Department of Education as its source for cash, with the students serving unwittingly as the means by which RSHT enriches itself at the expense of both the students and the public,” the suit said.
The settlement allows the school to end the case without admitting any wrongdoing. The $5 million figure was initially approved in May after a mediation process last fall that included the school, the plaintiffs’ attorneys and the school’s insurer. RSHT was represented by attorney Christopher Perkins of LeClairRyan.
Eight former RSHT students served as lead plaintiffs. More than 4,100 former students who attended the school between July 1, 2004, and Feb. 28, 2013, are eligible to receive a payout from the settlement.
For their help in establishing and building the case, the lead plaintiffs get a larger share of the settlement, equaling payouts just under $200,000. That’s common practice in class action law, Schlactus said.
Another 75 who provided declarations in the case get incentive payments of $3,000.
Richmond law firm BrownGreer has been hired as the claims administrator to dish out the money in the case, Schlactus said. BrownGreer is known for handling large settlement cases, most recently the multibillion-dollar BP oil spill case in the Gulf of Mexico.
Members of the class have 90 days following July 25 to return their claim forms. Checks will be disbursed thereafter.
Schlactus said this case could serve as a deterrent for other for-profit schools that operate in a similar fashion and potentially as legal precedent for other such cases.
“We do suspect that the problem runs much deeper in the for-profit college industry, and we do hope this sets a valuable precedent,” he said.
Schlactus said Richmond U.S. District Court Judge John Gibney seemed to want to make an example.
“During the course of the hearing, the judge made comments suggesting it would be good for others in the industry to take notice, both in the Richmond area and around the country,” he said.