Strategic Education, Inc. 10-Q

Item 1. Legal Proceedings We are involved in litigation and other legal proceedings arising out of the ordinary course of our business. From time to time, certain matters may arise that are other than ordinary and routine. The outcome of such matters is uncertain, and we may incur costs in the future to defend, settle, or otherwise resolve them. We currently believe that the ultimate outcome of such matters will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect future results of operations in a particular period. On April 20, 2021, Capella University received a letter from the Department of Education referencing the Wright matter (described below), and indicating that the Department will require a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 1,000 borrower defense applications that have been submitted regarding Capella. According to the Department, some of the applications allege similar claims as in the Wright matter concerning alleged misrepresentations of the length of time to complete doctoral programs. Capella has since received approximately 500 applications for borrower defense to repayment and is cooperating with the Department’s fact-finding process. Wright, et al. v. Capella Education Co., et al. was filed several years ago in the United States District Court for the District of Minnesota. After the court granted Capella’s motion to dismiss in relation to all but one plaintiff, the plaintiff filed a motion for leave to file a second amended complaint on October 5, 2020, seeking to add six named plaintiffs as well as additional sub-classes and causes of action to the lawsuit. On April 2, 2021, the magistrate judge issued an order granting plaintiff’s motion to amend the complaint in part, allowing for the addition of six new plaintiffs as well as additional subclasses and causes of action. Capella intends to vigorously defend this case, including any request for class certification.