Litigation funding deal threatens class action over US college financial aid

A proposed class action lawsuit accusing elite U.S. universities of suppressing competition for financial aid and favoring wealthy students is facing complications due to an undisclosed litigation funding arrangement. The issue arose as U.S. District Judge Matthew Kennelly considered class certification, which could pressure the universities to settle. Two of the plaintiffs’ law firms, Berger Montague and Freedman Normand Friedland, apologized for failing to disclose the involvement of Gilbert Litigators & Counselors and its associated litigation funder.

The lawsuit, brought on behalf of over 200,000 students, alleges that universities like Cornell, Georgetown, and the University of Pennsylvania overcharged tuition. Twelve universities have already settled for nearly $320 million. Judge Kennelly expressed concern about potentially being misled, as the firms did not initially describe the funding agreement. The firms argued they should remain as representatives of the class, while Gilbert Litigators asserted that removing them would unfairly benefit the universities.

The firms attributed the disclosure lapse to using outdated language in court filings and are implementing new transparency policies. Litigation funders provide financing in exchange for a portion of any settlement, reducing the financial risk for law firms. The judge is not questioning litigation funding itself, but the accuracy of previous statements regarding risk and compensation.

(Source：Reuters)