The Court of Appeals has reversed a $3 million penalty against a for-profit college, granted a new trial, and ordered that a different judge take over the case involving alleged violations of the state’s consumer protection law.

A three-judge panel on Thursday decided the Colorado Attorney General’s Office needed to show that the marketing practices of CollegeAmerica – which has campuses in Denver, Colorado Springs and Fort Collins – were not only knowingly false and misleading, but had a substantial public impact, too. Because Denver District Court Judge Ross B.H. Buchanan believed the latter requirement did not apply, there will need to be a new trial to address the issue.

A spokesperson for Attorney General Phil Weiser said his office is studying the ruling and will determine how to proceed in the case. 

The ruling in its favor curiously arrives at the same time CollegeAmerica’s website indicates that all campuses are permanently closed. USA Today reported earlier this month that the parent organization has abruptly shut down after losing its accreditation.

In Dec. 2014, the attorney general’s office filed a civil enforcement action against against the Center for Excellence in Higher Education, of which CollegeAmerica is a part. CollegeAmerica is a for-profit college that enrolled just under 11,000 students in Colorado between 2006 and 2016. Forty percent were students of color, 68% were women and upwards of 80% had a family income of less than $40,000.

However, between 60% and two-thirds of CollegeAmerica students did not graduate, the trial court found.

The attorney general’s office argued that CollegeAmerica had violated the Colorado Consumer Protection Act with deceptive advertising that promised them high incomes, but, once enrolled, saddled them with debt.

“We make it easy to start your career faster and make more money sooner!” one piece of advertising indicated. “With tuition assistance you can save money as you prepare for a future where you could earn significantly more money – up to $1 million more over your lifetime!”

What the government referred to as CollegeAmerica’s “million dollar promise” was a reference to college graduates’ ability, on average, to earn $1 million more over their lifetimes than non-degree holders. The marketing also included average and starting salary figures for selected industries.

CollegeAmerica “knows full well the importance of this message, but is trying to protect themselves from liability by using footnotes, small print and disclaimers,” Solicitor General Eric Olson told the appellate judges during oral arguments.

Buchanan found that CollegeAmerica advertised starting salaries for specific degrees that were as much as double what the institution knew its own graduates were actually getting paid. Even though the nationwide statistics were true, they effectively misled prospective students to believe they would attain similar earnings with a CollegeAmerica degree.

“Defendants represented in their advertisements and during the admission process that their programs of study were of a particular standard or quality in terms of wage and employment outcomes when they knew that they were of another,” Buchanan wrote in his decision.

The judge also determined CollegeAmerica and its leaders misrepresented the characteristics of certain programs, including x-ray and EMT training.

“CollegeAmerica systemically cheated vulnerable students in our state,” said Weiser at the time in response to Buchanan’s decision. “It is now being held accountable. Protecting students from predatory behavior – particularly from schools looking to make a profit at their expense – and helping Colorado students navigate through student loan burdens will continue to be a priority of the Attorney General’s Office.”

Lawrence Pacheco, a spokesperson for Weiser, said on Thursday the attorney general still stands by that statement.

However, on appeal, CollegeAmerica disputed Buchanan’s determination that the state did not have to follow a 1998 Supreme Court decision stating that alleged violations of the consumer protection law “must significantly impact the public as actual or potential consumers of the defendant’s goods, services, or property.” Rather than affecting the public, the civil action against it reflected “private misunderstandings of a handful of students,” CollegeAmerica argued.

In deciding the Supreme Court’s precedent did not apply to the attorney general, Buchanan pointed to 2019 legislation the governor signed into law, which eliminated the need for the attorney general or district attorneys to prove that a deceptive trade practice had a significant public impact. The judge concluded that not only did the legislation “clarify” the law, rather than change it, but it applied retroactively to the time of CollegeAmerica’s 2017 trial.

But the Court of Appeals found insufficient evidence that the General Assembly intended for the legislation to merely clarify the status quo.

“To the contrary, the bill title states that it “concern[s] the creation of additional protections,” noted Chief Judge Steve Bernard in the panel’s August 26 opinion. “Such language indicates an intent to change the law.”

The panel also indicated Buchanan will not be presiding over further proceedings in the matter. While acknowledging that the case was highly complex, with nearly 50 witnesses over a four week trial, the judge had taken almost three years before issuing a ruling in August 2020. The delay amounted to an “extreme circumstance,” wrote Bernard.

In describing Buchanan’s handling of the case, the appellate panel inadvertently revealed that he was the subject last year of a private reprimand from the Colorado Commission on Judicial Discipline. The commission recently released its annual report for 2020, and noted there were a total of three sanctions given privately to undisclosed state judges.

One of the reprimands went to a judge “for a delay of nearly three years in issuing a decision following a 19 day trial in a complex and highly contentious matter involving allegations by the Attorney General about the defendants’ business practices.” Although the disciplinary body does not reveal the identities of judges who are sanctioned in private, the summary clearly points to Buchanan and the CollegeAmerica case.

The panel’s ruling, however, left in tact Buchanan’s findings of Uniform Consumer Credit Code violations. The code protects against unfair practices by suppliers of credit, and bars “unconscionable agreements” by creditors. CollegeAmerica offered its own loan program, EduPlau, with a 7% interest rate to students.

Buchanan decided that in some instances, CollegeAmerica did act unconscionably, harming students who believed they would be able to become EMTs or achieve other certifications, or who were unable to service their loans due to their homelessness. Buchanan halted EduPlan loans going forward for certain types of enrollments, and ordered CollegeAmerica to forgive and refund the balances of 14 students.

Attorneys for CollegeAmerica and its leaders declined to comment on the panel’s decision.

After the Center for Excellence in Higher Education shut down its campuses earlier this month, three Democratic U.S. senators cited Buchanan’s 2020 findings of fraud in urging U.S. Secretary of Education Miguel Cardona to assist students affected by the for-profit institution’s closure.

For-profit colleges account for 10% of student enrollment but nearly half of all defaults on student loans. Sociologist Patrick Denice has determined that people with associate’s degrees from for-profit colleges do not have significantly different earnings from high school graduates. Only one in four students attending for-profit colleges graduates within six years.

During the Obama administration, the U.S. Department of Education put forth a rule to cut off federal funding primarily to for-profit colleges whose vocational graduates were left with consistently high debt. The Trump administration repealed the rule.

The case is Colorado v. Center for Excellence in Higher Education, Inc. et al.