More JAWS for INTO and USF

Sequels are rarely as good as the original but after a new hope with previous reports of dispute resolution between University of South Florida (USF)1 and INTO University Partnerships (INTO)1 we may have reached a point where the empire strikes back.  For new readers, USF gave notice to voluntarily dismiss its case against defendants INTO on 3 January 2023, on the basis that the defendants were “taking the actions that the Financing Corporation’s declaratory judgment lawsuit sought.”2  This followed a hearing on 16 December 2022 where USF’s motion for the appointment of a Receiver for INTO USF, INC had been heard.  Eventually, on 13 February 2023, Circuit Judge Darren D. Farfante declined “USF Plaintiffs’ Motion for Appointment of a Receiver.”3 but the case has been reopened.

The following commentary attempts to outline progress and indicate key issues with reference to the publicly available filings.  These are complex issues and readers looking for a more complete understanding should access the Court records.  I make no attempt to comment on the merits of either case and welcome authoritative comments and amendment.   

Just When You Thought It Was Safe to Go Back in the Water

Even before the motion was declined USF had sought “..an order finding that the Financing Corporation is the prevailing party in its request for declaratory relief…..and is therefore entitled to attorney’s fees and costs, to be paid by Defendants…”4

The same day, INTO USF, Inc. and INTO USF LP filed to “…respectfully request that the Court (i) declare the INTO Parties as the prevailing parties in the declaratory judgment action, and (ii) hold in abeyance determination of the amount of fees and costs owed until the remaining claims between the parties are resolved.”5

There have been further filings on the matter on both the side of USF6,8 and that of the INTO parties7,9.   There is a good amount of legal argument but for the lay person the choice phrases include assertions like, “a pyrrhic victory”6, “completely ignores both Florida case law and the facts of this case”7, “..hoisted by their own petard”8, and “..premised entirely on a sleight-of-hand”9.  It’s all good knockabout stuff but one wonders how much lawyerly time and client money is going into this.  

The case then became an SRS Reopen Event on 16 February 2023.14  It appears that the “prevailing” party “..in the Declaratory Judgment Action (Doc #97) and Plaintiff’s Motion to Determine Entitlement to Prevailing Party Attorneys’ Fees and Costs (Doc #98)” will now be the subject of a Zoom hearing on May 10, 2023 at 2.30pm13

While this has been going on there have been developments in INTO’s claims of breach of fiduciary duty against the Jennifer Condon, Karen Holbrook, Nick Trivunovich, and Ralph Wilcox (collectively known in the case filings as the “FC Directors”).  In summary, INTO argue that they “…served as directors of INTO USF, Inc and owed it fiduciary duties, simultaneously served in positions for USF and prioritized the interests of USF over the interests of the Company in seeking its wind-down and termination.”16

This had originally been included as Count V of INTO’s complaint but had been challenged on several grounds including that the individuals had sovereign immunity by dint of carrying out their duties as a result of being employees of USF.  In a motion to dismiss this aspect of INTO’s case the filing noted “Section 768.28(9) protects state employees for torts committed within the scope of their employment.” and that “All the actions the FC Directors took that allegedly breached their fiduciary duty occurred while USF employed them.”11 The judge found in favor of this argument but while, “As pled, sovereign immunity bars Count V against the FC Directors” the Plaintiffs (INTO) were “..given leave to amend Count V of the Amended Complaint against the FC Directors.9

The opportunity to make such an amendment was taken in the Second Amended Complaint10.  Where Count V alleging “Breach of Fiduciary Duty Against the Former USFFC-Designated Joint Venture Directors” has been re-drafted.  There are several amendments but an example that indicates the tone says, “The Former USFFC-Designated Joint Venture Directors were appointed to the Board, and took on these fiduciary responsibilities to the Joint Venture, independent of the duties and responsibilities they owed to USF by the nature of their employment.”

The deadline for the defendants to respond to the Second Amended Complaint was originally 9 March 2023 but an extension to 20 March 2023 was granted without any opposition.12 There seems little doubt that this falls into thecategory of….to be continued.

Land of Lincoln Loss

All this comes as market reports suggest that the joint venture between INTO and Illinois State University (ISU) has come to an end with a direct recruitment arrangement remaining.17  The joint venture was formed in March 2018 and as of “June 30, 2022 and 2021, the Company had an accumulated deficit of $12,155,144 and $11,806,337, respectively.” according to the financial statements and reports.  It becomes the sixth of INTO’s eleven US joint ventures to close since 2020 (including INTO St Louis which is now 100% owned by INTO).

Perhaps interestingly,  ISU’s international student population (non-US citizen in student enrollment reports) appears to have climbed quickly over the past five years going from 511 to 736 from Fall 2018 to Fall 2022.  However, the significant change is year on year from 2021 (557 enrolled) to 2022 (736 enrolled) with the growth entirely made up of graduate students.  Meanwhile, non-degree seeking international students (the usual location of pathway numbers in US university enrollment data) fell from 44 in Fall 2018 to 14 in Fall 2022.

It seems possible that ISU has been able to benefit from the more widespread growth in graduate students from south-east Asia but that this has not flowed through in any meaningful way to the pathway operation.  That would reflect the situation seen at some other pathway Centers in INTO’s US portfolio.  It remains to be seen how other joint venture partners reflect on the situation as Fall 2023 comes into sharp focus.  

NOTES

  1. The case in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida Circuit Civil Division is formally between USF Financing Corporation (plaintiffs) and INTO USF LP and INTO USF, INC (defendants).  The terms USF and INTO are used in this blog for brevity.  The Consolidated Lead Case is 22-CA-006001, Div. L. and  filings referenced below relate to this case. (Joint Case Management Report – Filing # 162471158 E-Filed 12/06/2022 12:51:36 PM16)
  2. Filing # 163938884 E-Filed 01/03/2023 09:29:50 AM
  3. 02/13/2023 11:22:52 AM Electronically Filed: Hillsborough County/13th Judicial Circuit.
  4. Filing # 166039948 E-Filed 02/02/2023 05:03:54 PM
  5. Filing # 166035151 E-Filed 02/02/2023 04:30:42 PM
  6. Filing # 166713446 E-Filed 02/13/2023 05:30:56 PM
  7. Filing # 166710887 E-Filed 02/13/2023 05:03:58 PM
  8. Filing # 167161634 E-Filed 02/20/2023 04:55:28 PM
  9. Filing # 167148563 E-Filed 02/20/2023 03:16:05 PM
  10. 02/14/2023 01:11:28 PM Electronically Filed: Hillsborough County/13th Judicial Circuit.
  11. Filing # 167652717 E-Filed 02/27/2023 07:53:06 PM
  12. Filing # 162259450 E-Filed 12/02/2022 11:01:26 AM
  13. 03/08/2023 06:38:01 AM Electronically Filed: Hillsborough County/13th Judicial Circuit.
  14. Filing # 168483841 E-Filed 03/10/2023 01:09:08 PM
  15. Reopen event: A reopen event occurs when a motion, pleading or other recordable action occurs on a case that requires additional court activity after a disposition event has closed the case for court activity. Note that a reopen event involves at least one action and that additional post-judgment actions may occur before the case is reclosed.
  16. Filing # 162471158 E-Filed 12/06/2022 12:51:36 PM
  17. It is reasonable to note that both INTO and ISU appear to show INTO pathway courses on their websites.  Any update from either party is welcome.

Image by Mote Oo Education from Pixabay 

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