Elite U.S. universities are intensifying their defense in a high-profile antitrust lawsuit by challenging the financial arrangements of the plaintiffs’ legal team, sparking a notable debate over the role of third-party litigation funding in class action cases. The case, pending before U.S. District Judge Matthew Kennelly in Chicago, involves more than 200,000 current and former students who allege that elite universities improperly favored wealthy applicants over those requiring financial aid, potentially violating antitrust laws.
Background of the Litigation
The lawsuit, which names prestigious institutions including Cornell, the University of Pennsylvania, MIT, Georgetown, and Notre Dame, contends that these universities’ admissions practices disadvantaged students with financial need. While some universities, such as Columbia and Dartmouth, have settled for a combined total of nearly $320 million, others continue to vigorously contest the claims. All defendants, including those who have settled, deny wrongdoing.
The plaintiffs’ legal team, led by Gilbert Litigators & Counselors (GLC) along with Berger Montague and Freedman Normand Friedland, has argued that their efforts have produced “extraordinary results over strenuous opposition,” asserting that they meet the requirements to serve as class counsel. However, the universities are now targeting GLC’s use of third-party litigation funding, claiming that it undermines the firm’s adequacy to represent the class.
The Funding Dispute
At the heart of the controversy is GLC’s financial arrangement with outside litigation funders. Third-party litigation funding involves investors covering a portion of legal costs in exchange for a share of any settlement or judgment. The universities argue that such funding reduces the financial risk borne by the law firm, potentially affecting the firm’s suitability as class counsel.
GLC, however, maintains that the universities misrepresented the significance of the funding arrangement. According to the firm, the financing covers only 40% of its own fees and less than 16% of the total fees incurred by all firms seeking class certification. GLC emphasizes that under the arrangement, both the firm and the funder share the risk of loss and delay. The firm also asserts that there is no court precedent disqualifying class counsel solely for using litigation funding, nor is there a requirement to disclose such arrangements in this context.
“Class Counsel accurately represented that they were working on a ‘contingent’ basis and incurred ‘substantial risk,’” the firm said in court filings. They described the universities’ challenge as a “contrived” effort to prevent class certification and avoid potential liability.
Legal Implications
This dispute raises new questions about how third-party litigation funding may affect class action procedures, particularly the determination of whether proposed class counsel are “adequate” under federal rules. Legal experts note that while funding is increasingly common in complex litigation, its potential impact on the class certification process remains largely unexplored.
“This is a new twist,” said Stephen Younger, a legal expert with law firm Withers. “Courts have considered issues of funding in other contexts, but whether it can undermine a lawyer’s adequacy in representing a class appears to be largely untested.”
Judge Kennelly has acknowledged the relevance of the funding arrangements, noting that the documents are “at least potentially relevant regarding the motion for class certification given the contentions that proposed class counsel misled the Court in earlier fee petitions regarding whether they were at risk.” The filings related to the funding remain under seal, highlighting the sensitivity of the dispute.
Broader Context in Higher Education
This litigation is part of a broader wave of antitrust scrutiny targeting elite colleges and universities in the United States. In a separate case, a U.S. District Judge recently dismissed claims against 40 private universities, including Harvard and Yale, which alleged collusion in calculating financial aid by considering noncustodial parents’ income and assets. While that decision allowed for the possibility of amending and refiling the case, it illustrates the increasing attention regulators and litigants are giving to admissions practices and financial aid policies.
Looking Ahead
The resolution of the funding dispute could have far-reaching implications for both antitrust law and the use of third-party financing in complex litigation. Should the court find that reliance on external funding impacts the adequacy of class counsel, it could establish a new standard affecting future class action lawsuits. Conversely, if the court upholds GLC’s position, it may reinforce the acceptability of third-party funding arrangements and provide greater clarity for plaintiffs’ lawyers seeking to manage financial risk.
As the case unfolds, legal observers will be closely watching how Judge Kennelly navigates the intersection of class certification rules, attorney adequacy, and modern funding practices. Beyond this particular lawsuit, the outcome could shape the financial strategies of law firms engaged in large-scale litigation across multiple industries.
The stakes are high not only for the universities and students involved but also for the broader legal community, as the case could influence how complex class actions are funded, litigated, and ultimately resolved in the years to come.
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