COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

COMMITMENTS AND CONTINGENCIES [Abstract]

9.	COMMITMENTS AND CONTINGENCIES

In the ordinary conduct of its business, the Company is subject to certain lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending legal proceedings to which it is a party will have a material adverse effect on the Company’s business, financial condition, and results of operations or cash flows.

On November 16, 2022, a federal district court in California in the lawsuit Sweet v. Cardona granted final approval of a settlement agreement under which the DOE would agree to discharge loans and refund all prior loan payments to covered student borrowers who have asserted a Borrower Defense to Repayment to the DOE and whose borrower defense claims have not yet been granted or denied on the merits, which includes former students at our institutions as well as at a long list of other institutions. Subsequently, we, and two other intervening school companies, filed notices of appeal and asked the district court to stay the settlement from taking effect until the appeals were decided. Plaintiffs and the DOE thereafter filed oppositions to our stay request and, after a hearing, the district court denied our stay request, but extended the temporary stay of loan discharges and refunds associated with the three school companies for seven days to allow us to file a motion for a stay with the U.S. Court of Appeals for the Ninth Circuit. On February 27, 2023, we and the two other school companies that appealed filed a joint motion for a stay with the Ninth Circuit. On March 29, 2023, the Ninth Circuit denied the motion to stay the judgment pending appeal. On April 4, 2023, we and the two other school companies filed an emergency application with the Supreme Court of the United States to stay the district court’s judgment. On April 13, 2023, the Supreme Court denied the petition.

Despite the denials of our stay requests, we intend to ask the Ninth Circuit to overturn the district court’s judgment approving the final settlement. However, as a result of the denials of our stay requests, the DOE could automatically approve all of the pending borrower defense applications concerning us that were submitted to the DOE on or before June 22, 2022 and to provide such automatic approval without evaluating or accounting for any of the legal or factual grounds that we provided for contesting the applications that were provided to us and without waiting for the Ninth Circuit to rule on the appeal of the district court’s judgment (which could take many months or more to occur). The DOE may or may not attempt to seek recoupment from applicable schools relating to approval of borrower defense applications. If the DOE approves borrower defense applications concerning us and attempts to recoup from us the loan amounts in the approved applications, we would consider our options for challenging the legal and factual bases for such actions. The settlement also requires the DOE to review borrower defense applications submitted after June 22, 2022 and before November 16, 2022 within 36 months of the final settlement date. If the DOE grants some or all of these applications, the DOE also could attempt to recoup from us the loan amounts relating to these applications as well. We cannot predict whether the settlement will be upheld on appeal, what actions the DOE might take if the settlement is upheld on appeal (including the ultimate timing or amount of borrower defense applications the DOE may grant in the future and the timing or amount of any possible liabilities or sanctions that the DOE may seek to recover from or impose on the Company, if any), whether the DOE or other agencies might take actions against us without waiting to see whether the settlement is upheld on appeal now that the stay requests have been denied, or what the outcome of our challenges to such actions will be, but such actions could have a material adverse effect on our business and results of operations.