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Contingencies | 6 Months Ended
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Jun. 30, 2019
Contingencies Disclosure [Abstract] |
Contingencies | 8. CONTINGENCIES An accrual for estimated legal fees and settlements of $30.8 million and $6.1 million at June 30, 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 310 remaining 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 65 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 remaining 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 that remain unresolved. 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. On July 26, 2019, the Company and certain operating subsidiaries (together, the “CEC Parties”) executed a settlement agreement (the “FTC Agreement”) with the FTC to resolve the inquiry commenced by the FTC on August 20, 2015. While not admitting any wrongdoing, the Company chose to settle the FTC inquiry after almost four years of legal expenses and cooperating with the FTC’s investigation. The Company is pleased this matter is reaching resolution, particularly as its universities focus on their strategic priorities that directly support quality academic outcomes and their students’ success. Student services and access to federal student loans are not impacted by the FTC Agreement, nor does the FTC Agreement involve the academic quality of the educational programs at the Company’s universities. The FTC Agreement provides that the CEC Parties will pay $30 million in monetary relief, including for the purpose of restitution, to be distributed at the sole discretion of the FTC. The Company recorded a pre-tax settlement charge of $30 million in the second quarter of 2019 arising from the monetary terms of the settlement. Under the terms of the FTC Agreement, the CEC Parties have agreed to continued compliance with the Federal Trade Commission Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act, including compliance with the national do not call registry. The CEC Parties agreed to enhance their current operational and compliance processes with respect to prospective student leads purchased from lead aggregators and will implement other agreed-upon compliance measures. Specifically, the FTC Agreement requires the operation of a system to monitor lead aggregators and generators involving a compliance review by, or on behalf of, the CEC Parties of the various sources a prospective student interacts with prior to the CEC Parties’ purchase and use of the prospective student lead. In addition, the FTC Agreement contains requirements regarding employee and lead aggregator acknowledgements of the FTC Agreement, compliance certifications and record creation and maintenance. The FTC Agreement which is in the form of a Stipulation as to Entry of an Order for Permanent Injunction and Monetary Judgment is subject to approval by the Commissioners of the FTC and upon approval by them will be submitted to, and will become effective upon its entry as an Order in, the United States District Court of the Northern District of Illinois. The Company anticipates the Order will be entered within the next 60 days, although the approval of the Commissioners of the FTC and timing of entry of the Order is not certain. The principal provisions of the FTC Agreement will remain in effect for twenty years. 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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