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Contingencies | 3 Months Ended
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Mar. 31, 2019
Contingencies Disclosure [Abstract] |
Contingencies | 8. CONTINGENCIES An accrual for estimated legal fees and settlements of $1.7 million and $6.1 million at March 31, 2019 and December 31, 2018, respectively, is presented within current liabilities – other accrued expenses on our condensed consolidated balance sheets. We record a liability when we believe that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that was previously accrued, and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. We may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (1) if the damages sought are indeterminate; (2) if the proceedings are in early stages; (3) if there is uncertainty as to the outcome of pending appeals, motions, or settlements; (4) if there are significant factual issues to be determined or resolved; and (5) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. We are, or were, a party to the following legal proceedings that we consider to be outside the scope of ordinary routine litigation incidental to our business. Due to the inherent uncertainties of litigation, we cannot predict the ultimate outcome of these matters. An unfavorable outcome of any one or more of these matters could have a material adverse impact on our business, reputation, results of operations, cash flows and financial position. Oregon Arbitrations. There are approximately 315 active individual arbitration claims which were filed against Western Culinary Institute, Ltd. (“WCI”) from March through July 2018, all of which are being administered by the American Arbitration Association. These individual arbitrations involve students who attended WCI from approximately 2008 to 2010. Each arbitration seeks monetary damages and alleges that WCI made a variety of misrepresentations to the individual student filing the arbitration, relating generally to WCI’s placement statistics, students’ employment prospects upon graduation from WCI, the value and quality of an education at WCI, and the amount of tuition students could expect to pay as compared to salaries they could expect to earn after graduation. We expect that approximately 60 of the individual arbitrations will be sent back to state court for further action. The institution is no longer in operation and closed in 2017. Because of the early stages of these individual arbitrations and any related state court actions, the unique circumstances with respect to each individual student and the many questions of fact and law that have already arisen and that may arise in the future, the outcome of each of these individual actions is uncertain at this point. Based on information available to us at present, we cannot reasonably estimate a range of potential loss, if any, for these actions because of the inherent difficulty in assessing damages, if any, with respect to each individual student and the number of individual students, if any, who might be entitled to recover damages. Accordingly, we have not recognized any liability associated with any of these actions. Multi-State AGs. As previously disclosed, on January 3, 2019, the Company entered into agreements (the “AG Agreements”) with attorneys general from 48 states and the District of Columbia to bring closure to the multi-state inquiries ongoing since January 2014. The Company has not entered into an agreement with the attorney general of California and previously entered into an agreement with the attorney general of New York. FTC. On August 20, 2015, the Company received a request for information pursuant to a Civil Investigative Demand (“CID”) from the U.S. Federal Trade Commission (“FTC”). The CID was issued pursuant to a November 2013 resolution by the FTC directing an investigation to determine whether unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing or sale of secondary or postsecondary educational products or services, or educational accreditation products or services. The CID required the Company to provide documents and information regarding a broad spectrum of the business and practices of its subsidiaries and institutions for the period of January 1, 2010 to the present. The Company continued to respond to supplemental requests for information from the FTC, including in response to a CID dated July 5, 2018, requesting specific information about telephone calls placed to prospective students from 2013 to the present. The FTC staff also requested information regarding third party lead aggregators and generators from which the Company received prospective student leads and the Company’s related compliance efforts. The Company has agreed to toll the statute of limitations from October 18, 2018 until such time as the tolling may be terminated with respect to any claims the FTC may have under the Federal Trade Commission Act or the Telemarketing and Consumer Fraud and Abuse Prevention Act (collectively, the “Acts”). While the Company denies any wrongdoing, the Company is in discussions with the FTC staff to resolve concerns and potential claims the staff has recommended for consideration by the Commissioners of the FTC. To date, the Company and the FTC staff have been unable to reach an agreement on all of the terms of relief that the FTC staff might recommend be accepted by the FTC Commissioners to resolve their investigation. Forms of relief that have been discussed with the FTC staff, in addition to monetary relief, include certain operational and compliance changes by the Company with respect to lead aggregators and generators to support future compliance with the Acts. If negotiations are unsuccessful at the FTC staff or Commission level, the Company expects that the FTC Commissioners will decide whether to proceed with filing a complaint against the Company and its institutions seeking monetary, injunctive and other relief. If filed, the Company believes such a complaint would allege that the Company violated the Acts by, among other things: (i) being responsible for alleged misrepresentations made in the past to prospective students by three lead aggregators and/or generators from which the Company received prospective student leads, (ii) being responsible for telephone calls previously made by these three lead aggregators and/or generators and by the Company (where the consent received by the Company is alleged to be invalid due to alleged misrepresentations by these three lead aggregators and/or generators) to numbers listed on the National Do Not Call Registry in violation of the “Do Not Call” rules, and (iii) engaging in allegedly prohibited telemarketing acts through the pattern and volume of calls made in the past primarily to former students regarding re-enrolling to complete their degrees. The ultimate outcome of the FTC’s inquiry is uncertain. As a result of this inquiry or pursuant to any related legal action against us, the Company or certain of its institutions may be subject to claims for monetary relief or for failure to comply with federal laws or regulations, required to pay significant sums in the form of equitable relief, penalties and/or required to curtail or modify their operations. Based on information available to us at present and the uncertain outcome of this inquiry, we cannot reasonably estimate a range of potential loss this inquiry might have on the Company. Other. In addition to the legal proceedings and other matters described above, we receive informal requests from state attorneys general and other government agencies relating to specific complaints they have received from students or former students which seek information about the student, our programs, and other matters relating to our activities in the relevant state. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices in a particular state. We are also subject to a variety of other claims, lawsuits, arbitrations and investigations that arise from time to time out of the conduct of our business, including, but not limited to, matters involving prospective students, students or graduates, alleged violations of the Telephone Consumer Protection Act, both individually and on behalf of a putative class, and employment matters. While we currently believe that these additional matters, individually or in aggregate, will not have a material adverse impact on our financial position, cash flows or results of operations, these additional matters are subject to inherent uncertainties, and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur in any one or more of these matters, there exists the possibility of a material adverse impact on our business, reputation, financial position and cash flows.

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- Definition The entire disclosure for legal proceedings, legal contingencies, litigation, regulatory and environmental matters and other contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 + Details
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