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U.S. Files for Overlap Judgment

By Karen Kaplan
Executive Editor

MIT lawyers are preparing to file a brief in U.S. District Court opposing a request by the federal government for a ruling without trial in its antitrust suit against MIT. The government claims that the Institute unlawfully colluded with several high-caliber schools in determining student financial aid packages.

The government filed a motion for a summary judgment on April 3 in Philadelphia. MIT holds that the motion, if it is granted, will unfairly deny the Institute the right to fully present its reasons for discussing financial aid awards with other schools in the so-called Overlap Group, which includes 23 East Coast colleges.

Bruce Pearson, a trial lawyer with the Justice Department who is involved with the case, said MIT will be able to present its position in a brief for the court. "If the summary judgment is granted, it will be because the court felt MIT didn't have an adequate legal defense," he said.

Ten months ago, MIT was accused of violating the Sherman Antitrust Act, which makes "agreements in restraint of trade illegal," Pearson said. Agreements among Overlap Group schools about financial aid for students are "an example of price fixing in restraint of trade," he said.

The Overlap Group met each spring to discuss the financial aid packages offered to students admitted to more than one of the member schools. The colleges agreed to offer only need-based scholarships to these students in an effort to avoid bidding wars, in which students can be offered hefty merit-based awards.

"All of the students admitted to MIT are extremely well qualified. The mission of the aid program at MIT is to enable them all to attend," said Leonard V. Gallagher '54, director of student financial aid.

"In the absence of the [Overlap Group] agreement, schools would engage in merit-aid competition. Money to fund that merit-aid competition would come from need-based aid," said Thane Scott, an attorney representing MIT in the lawsuit. "The amount of money available for need-based aid would be reduced. Then you have the question of what do you do with the kids who need aid but for whom it isn't available," he added.

Gallagher said that "Freed from the constraints that the Overlap arrangement provided each of us, there is the fear that a college will begin to use financial aid to entice students to attend and that other colleges will want to follow suit."

Lawyers for the government contend that MIT is in agreement with them on the major facts of the case, and that this makes the case ripe for a decision without a trial. "We think there are facts that are not in dispute and that these facts are pretty dispositive," Pearson said.

Pearson said there are three major areas of agreement. "First, the Ivy Overlap members agreed not to give merit aid. Second, they agreed on a formula to determine family payment [self-help level] for aided students. ... Third, for those students admitted to two or more of the Overlap member schools, their family contributions were discussed at a spring meeting," he said.

Thane Scott, a lawyer for MIT, disagreed. "The question is, why did people meet and what was the effect of the meeting. MIT's position is the purpose of the Overlap meetings were good purposes. ... Because of Overlap, lots of good things were accomplished and many students benefited who would otherwise have been denied admission or who wouldn't have gotten any financial aid," Scott said.

Government position contested

In a statement released on Friday, MIT lists several "problems with the government's move to bar a trial in this case." Among them are:

* Wealthy students will be pitted against poor students.

"The government's motion ignores the economic reality that giving scholarships to talented, wealthy students will take scholarships away from talented, poorer students, and thus close the door to those who are unable to attend MIT without scholarship assistance. ... For MIT, this would be unacceptable, particularly given the uniformly high qualifications of all the students MIT admits," the statement said.

"The Overlap Group has no effect on the aggregate financial aid awards of a school," said Scott. The government's position is that by agreeing to award only need-based financial aid, scholarships will only go to talented, poor students and none will go to talented, wealthy students, and that this constitutes discrimination against wealthy students, Scott said. "It's hard to deny who the beneficiaries of the government lawsuit are," he said.

* Private colleges ought to be able to mandate need-based aid, since Congress mandates that federal scholarships be awarded solely based on need.

"Congress requires all colleges and applicants to agree to a need-based Financial Aid Form system designed to conserve scarce federal funds and to ensure that federal financial aid is awarded only to students whose families can demonstrate financial need. ... The private college's financial aid system was established to ensure that their limited, private financial aid funds were distributed solely on the basis of need," the statement said.

* "The Justice Department says need-based aid is all right for athletes; it should also be all right for their classmates," the statement said.

The Supreme Court has ruled that schools can agree to offer only need-based scholarships to athletes in order to regulate athletic competition between schools, Pearson said.

If schools can make agreements to only offer need-based scholarships to athletes, they should also be able to make similar agreements concerning academic scholarships for the rest of the student body in order to keep the policy consistent, Scott said.

"Athletic scholarships are not part of the case. It's just a price-fixing case," Pearson said.

Other schools signed decree

All other members of the Overlap Group signed a consent decree last May, agreeing not to discuss financial aid policies in the future without admitting past guilt. MIT was the only school to refuse to sign, and the Justice Department subsequently filed suit.

"The government contended it was an unlawful and unreasonable restraint of trade and commerce for the schools to agree to give financial aid solely on the basis of economic need, and to cooperate in making sure that private financial aid given to commonly-admitted undergraduates was based solely on the students' financial need," the statement said.

If the request for a summary judgment is denied, the case is expected to go to trial this summer.