Mount Ida students owed nothing for school's sudden shutdown, appeals court rules

For the second time, a federal court has ruled that Mt. Ida College owes students nothing for the way it suddenly shut down, not even those who were screwed because the closure didn't leave them enough time to find placement at a different school.

In a ruling today, the US Court of Appeals for the First Circuit in Boston said it agreed with a ruling by a federal judge last year that, under state law, Mt. Ida trustees had no "fiduciary" obligation to the students to keep them informed of the school's teetering finances, which culminated in the trustees selling the school to UMass Amherst and then shutting down the next day.

State law says the trustees only owe such an obligation to the college itself, and the college, obviously, did not complain. "The duty is not owed to the students," the court said. In fact, the court continued, an obligation to the students would have been inherently in conflict with the interests of the college, because if the students knew how badly the school was doing, they might have fled, leaving the school in even worse shape:

The interests of the students alleged on the facts here are in direct conflict with those of the institution. Early disclosure of financial distress might well have endangered the ability of the institution to recover and made the financial distress even worse. The Massachusetts [Attorney General's office] recognized in its March 13, 2019, letter that "premature notice of financial instability can result in a 'self-fulfilling prophecy.'" Indeed, even the plaintiffs recognize that the trustees ran the risk of students deciding not to enroll if a gloomy picture of Mount Ida's financials were painted.

The students argued the state law was just wrong and the court should "expand the law," but the court retorted: Nah, that's not the role of federal courts in cases like that. Besides:

The Massachusetts legislature just after these events occurred addressed the issue of how to improve the financial stability of higher education institutions going forward. The legislature decided yet again in the new legislation not to impose the duty that the plaintiffs now advocate should be imposed on the college itself.