Charlotte Law was unique in its trouble, but hardly alone

The Charlotte School of Law incurred the ignominious distinction of becoming the first law school to ever be forcibly closed down by regulators, but it was not the first law school to shutter its doors in recent years. Nor will it likely be the last.

While the students left in limbo by Charlotte’s collapse scramble to make alternative plans, it remains unclear what its demise might foretell for other struggling law schools.

“It’s hard to say because there are some unique aspects to Charlotte, in particular the actions of the U.S. Department of Education and the fact that it’s a for-profit law school,” said Brian Tamahana, a law professor at Washington University in St. Louis and author of the book Failing Law Schools. “That said, there are some factors that Charlotte has in common with other law schools—the decline in applications and declining credentials of incoming classes, which led to both a deteriorating financial situation and increasingly poor outcomes. So those aspects of this situation are common to law schools nationwide.”

Nearly every law school has been affected by the cratering in law school applications, but Charlotte was hit especially hard because it was in a uniquely poor position to attract the most qualified students. Over the last decade, the academic credentials of Charlotte’s incoming classes got weaker and weaker. As a result, attrition rates soared and bar passage rates, which were never especially good to begin with, plummeted, which is ultimately what drove the school out of business.

Charlotte was owned by the InfiLaw System, a for-profit consortium owned by Sterling Partners, a private equity firm. InfiLaw owns two other law schools, one in Arizona and one in Florida, that—assuming they don’t succumb to their own problems first—may also get caught up in the Charlotte maelstrom. A group of students has filed a class action lawsuit against Charlotte, InfiLaw and Sterling, alleging that the school defrauded them. If InfiLaw ends up on the hook for substantial damages, it could be the company’s death knell.

That’s it, we’re outta here

Meanwhile, other law schools are being wound down, in some cases by choice. In April, Whittier College in California decided that it would stop admitting students to its law school, which had become a liability for both the college’s finances and its academic reputation. Attorney Kyle McEntee, executive director at Law School Transparency, an advocacy and reform group, said that at least some other universities will likely to reach the same calculation in the coming years.

“A lot of this is going to come down to balancing act that each institution will have to analyze,” McEntee said. “Is it worth the cost and reputational drag of keeping afloat a school that has low performance and low revenue? I think it’s possible that some schools will conclude that they’re just not getting enough out of this, and that their law school does more harm than good.”

Closing down a few low-performing law schools might in theory provide a fillip for enrollment numbers at the schools that remain. But McEntee said that because Charlotte accepted so many students that had been unable to get into other law schools, alongside many Charlotte-area residents who weren’t in a position to relocate to a new city for three years, students at other local law schools will likely see few new classmates joining them by way of its closure.

“Ultimately, this is going to open up the applicant pool only a little bit,” McEntee said. “By and large, Charlotte was admitting and enrolling people those other schools would not touch, but that’s not universally the case. So some students that could get into other schools and have the mobility might enroll in one of those other schools, but probably not many.”

One door closes…

This all suggests that these are inopportune times to consider launching a new law school. But it’s nonetheless plausible that a new law school, attached to a traditional university, might rise up to fill the void left by Charlotte’s closure, which puts the City of Charlotte back in the position of being the largest metro area in the country without a law school nearby.

Phil Dubois, chancellor at UNC Charlotte, told local media in January that his school would re-open discussions about adding a law school, although he acknowledged that it might be difficult to make the case to legislators, who would have to approve the idea. McEntee said he thinks that a new law school in Charlotte will happen eventually, whether affiliated with UNC Charlotte or with some other college.

Deborah Merritt, a law professor at Moritz College of Law at The Ohio State University, said that a big city with no other law schools could be an attractive market for an existing university looking to add a law school. But that would still leave open the question of whether the Charlotte market would have enough legal jobs to absorb all those graduates.

“Universities traditionally see a law school as mark of prestige and excellence, and it seems that having a law school gave them a distinct shine that many universities wanted to have. And for many years law schools were financially self-sufficient, or even able to subsidize the rest of the university, although that’s not as true now,” Merritt said. “But that has to be weighed against the fact that we already seem to have more law schools than we need. It’s a tough environment because we’re already graduating more people nationwide than we have jobs for.”

The good news for law schools, such as it is, is that applications may have finally bottomed out. In the 2014-2015 year, just over 101,000 test-takers sat for the Law School Admission Test, the lowest number ever recorded. (The data goes back as far as 1987-1988.) There were modest increases in test-takers each of the last two years, and a 20 percent year-on-year increase for the test administered this June.

Not everyone who takes the LSAT ends up applying to law school, but the numbers suggest that there is at least an uptick in the number of people interested in enrolling in law school—just not, however, at Charlotte School of Law.

Follow David Donovan on Twitter @NCLWDonovan