YOUNGSTOWN, Ohio – A federal judge delivered mixed summary judgment decisions in the case between Eastern Gateway Community College and the company that administered its free college benefit program.
Student Resource Center, with which Eastern Gateway entered a contract in June 2017 for its free college benefit program, sued the college in 2022, citing breach of contract and seeking recovery of funds it contended it was owed.
Each party sought summary judgment on various issues in the case.
Judge Algenon L. Marbley of the U.S. District Court of the Southern District of Ohio on Monday granted SRC’s breach-of-contract claim for $2.3 million in profit sharing payments from Eastern Gateway prior to spring 2022. The judge, however, denied SRC’s breach-of-contract claim for $300,000 in other payments prior to September 2022.
The judge also granted SRC’s motion for summary judgment that its firing of its former CEO, Michael Perik, didn’t breach its collaboration agreement with Eastern Gateway. The college in May 2022 had issued a notice of breach after SRC fired and replaced Perik without notifying the college in advance. SRC alleged that Perik and Eastern Gateway’s former president, Michael Geoghegan, attempted to hide from a company interested in buying SRC that Eastern Gateway was being placed on probation by its accrediting body, the Higher Learning Commission.
Marbley also denied SRC’s motion for summary judgment that Eastern Gateway breached the contract by bringing SRC’s services in house and by contracting with another company. The judge wrote that the record is insufficient to conclude that the college’s hiring of Employee Benefit Services breached the noncompete clause of the contract. Eastern Gateway noted that EBS was a provider of health and life insurance benefits to unions, not an SRC competitor.
The judge also denied SRC’s claims for summary judgment for what it deemed Eastern Gateway’s failure to reimburse the company for profit sharing payments of about $7 million for fiscal year 2022 and about $2.3 million for fiscal year 2023.
“This Court finds that triable issues of fact exist as to whether EGCC’s profit-sharing payments for fiscal years 2022 and 2023 fell short and thus breached the agreement,” the judge wrote. “Contrary to SRC’s argument, EGCC cites both deposition and court testimony in support of the factual disputes between the parties …”
Further, Marbley also denied SRC’s motion for summary judgment regarding breach of contract in its representations and warranties. In July 2022, the U.S. Department of Education issued a cease and desist letter to Eastern Gateway regarding its free college program. The department argued the college was charging students who received Pell grants more than those who didn’t.
Free College Benefit Program revenues came from federal student financial aid programs, primarily under the Pell Grant Program, which Eastern Gateway would receive and pay to SRC for its services. By June 2022, 95% of SRC’s revenue came from the Free College Benefit Program.
In opposing the breach of contract claim, Eastern Gateway maintained that the DOE’s cease and desist letter can’t be evidence of breaches of representations or warranties of the agreement because those representations were made in June 2017.
“EGCC’s position is well-taken,” the judge wrote. “Representations and warranties made at the start of a contract do not extend to future performance unless there is an explicit agreement to that effect.”
Marbley also denied SRC’s motion for summary judgment regarding what it termed Eastern Gateway’s failure to pay $908,750 in operating expense reimbursements from Sept. 6, 2022, through May 23, 2023.
He also denied Eastern Gateway’s motion for summary judgment in its counterclaim that SRC breached the agreement and was overpaid, allowing the college to terminate the agreement.
“Whether EGCC did in fact materially breach the agreement, as the October 2022 Notice alleges, thereby triggering the agreement’s termination provision, is disputed,” the judge wrote. “This question thus remains a matter for the trier of fact to decide.”
Regarding Eastern Gateway’s contention in its counterclaim that SRC breached the agreement through a number of contractual violations, the judge also denied SRC’s motion for summary judgment.