Dive Brief: 

• Dozens of Vista College students who were enrolled at one of the chain's Texas campuses when the for-profit institution abruptly closed earlier this month have joined a proposed class-action lawsuit filed this week against the institution's parent company and top officials.
• The lawsuit alleges that Vista College's owners made misrepresentations to boost enrollment, didn't deliver promised education services or provide tuition refunds, and failed to set up plans to have students finish their education elsewhere. It says those actions constitute a breach of contract and fiduciary duty, fraud, misrepresentation, violations of Texas consumer protection law and unjust enrichment. It seeks monetary relief totaling more than $1 million, including for tuition refunds and out-of-pocket expenses.
• Ronda Racca, who was enrolled in the cosmetology program at Vista's Beaumont location, is listed as the initial plaintiff in the lawsuit, which has not yet been granted class-action status. Racca is also suing a private equity firm that has a majority stake in the organization.

Dive Insight: 

Vista College shocked students when it abruptly announced that it was shutting down operations Oct. 8. The for-profit chain — which has campuses in Texas, Arkansas and New Mexico — filed for Chapter 7 bankruptcy protection the next week. 

The chain also informed the U.S. Department of Education on Oct. 8 that it was shutting down operations, effective immediately, an agency spokesperson said in an email. The following Monday, it provided a list of some 1,800 students who were enrolled at the time of the closure. 

"Because this closure was sudden, the institution had no teach-out agreements in place," the spokesperson wrote. "However, the Department is working with accrediting and state agencies to identify teach-out locations for the impacted students."

Yet there were signs the chain was struggling a couple months prior. 

In August, the school's owners announced it would stop enrolling new students and transition to solely online learning. That move stemmed from falling enrollment, inadequate finances and changing regulations, according to the lawsuit. 

Federal data shows Vista College's enrollment steadily declined over the past few years, from 4,701 students in the fall of 2016 to 2,945 in the fall of 2020. The chain's online business had 574 students enrolled last fall.  

However, Vista College promised most students in good academic standing in August that they would have the opportunity to finish their programs, the lawsuit alleges. "We will continue to offer the courses you need to graduate from your programs, including students who started their programs in August 2021," school officials wrote in an email to students that is quoted in the lawsuit.

That month, Vista College founder and CEO Jim Tolbert also told a local news station that the decision to stop enrolling new students was meant to ensure the chain would have enough resources to help existing students "get exactly what they paid for."

The lawsuit, which was filed in District Court of Jefferson County in Texas, alleges Vista College officials violated state consumer protection laws, entitling students to compensation. The lawsuit's proposed class includes students who were enrolled at one of the chain's Texas campuses when it closed Oct. 8. 

Tim Ferguson — an attorney with Ferguson Law Firm, one of the two firms bringing the case — said in an email it represents around 80 to 100 students. "That number increases by the hour as the students are desperately seeking legal help," Ferguson wrote. 

Because Vista College filed for bankruptcy protections, the proposed class-action lawsuit is subject to an automatic stay, which stops most civil lawsuits and collection attempts against a debtor. Ferguson said the defendants are expected to ask the court to block the class-action lawsuit and respond to the complaint. 

"We will evaluate our options at that point," Ferguson wrote. 

Students weren't the only ones who were caught off guard by the closure. An official from the Texas Workforce Commission, which regulates the school, told a local news station that it was not officially informed about the shutdown. 

Vista notified students they may be eligible for closed-school loan discharges, which allow students to have their debts forgiven if their college closed while they were enrolled or shortly after they withdrew. 

"This for-profit education has revealed itself to be something that's very detrimental to people like these students who want to better themselves," said Mark Sparks, an attorney at the Ferguson Law Firm who is working on the case. 

Tolbert and Vista College did not immediately respond to Higher Ed Dive's request for comment.