How Bad is the Columbia Settlement Agreement?

Reporting (e.g., in the NY Times) on the settlement agreement between Columbia University and the United States government describes the $200 million that Columbia will pay to obtain restoration of its grant funding as a "fine." When I read that report, I was initially puzzled. None of the federal agencies whose leaders signed the agreement--the Departments of Justice, Education, and Health and Human Services--is authorized by law to impose fines on institutions found to be in violation of Title VI. Yet the ostensible offense that led the Trump administration to cancel $400 million of federal funding and threaten to cut off billions more in the future was Columbia's alleged violation of Title VI by failing to protect Jewish students from antisemitic harassment. Congress could have authorized fines as penalties for Title VI violations, but it didn't. So what entitles the executive branch to impose fines via settlement?

Reading the settlement agreement itself provides a partial answer. It does not use the term "fine" at all. What it says (in paragraph 10 on page 5) is this: "In settlement and compromise of the Released Claims in this Agreement Columbia shall pay the United States the sum of Two Hundred Million Dollars ($200,000,000) . . . ." The agreement (in part I.n at page 2) defines the "Released Claims" to include allegations of violations under not only Title VI but also Titles VII and IX, as well as provisions of the Americans with Disabilities Act, the Affordable Care Act, and the False Claims Act. However, with the exception of the False Claims Act, none of the other provisions cited authorizes fines either--and the cited section of the False Claims Act allows for a maximum fine of $10,000 "plus 3 times the amount of damages which the Government sustains because of the act of" the party violating the Act.

Doing the math, to justify a fine of $200 million, the government would have had to suffer over $66 million as a result of Columbia's having submitted false or fraudulent claims for payment. The government's False Claims theory of liability is not that Columbia submitted any such false or fraudulent claims but rather that its alleged civil rights violations--not just tolerating antisemitism but practicing affirmative action in hiring and admissions--rendered its applications for grant money fraudulent because a condition of such grants is the recipient's agreement to abide by Title VI and other civil rights statutes. Yet it's crucial to note that not only was there never any adjudication of any civil rights violations by Columbia, but even if there had been, there is no evidence that such violations caused any "damages" to the federal government, much less over $66 million worth of damages.

However, as I noted two paragraphs up, the agreement does not characterize Columbia's $200 million payment as a "fine." It simply refers to it as a payment to settle claims. In form, that is not so unusual. Parties facing potential liability frequently agree to settlement terms that could not be imposed by a court following an adjudication. For example, U.S. courts almost never order a defendant to apologize for wrongdoing as part of a remedy for a civil (or, for that matter, criminal) adjudication of liability. Nonetheless, it's quite common for settlement agreements to include an apology as one of the terms. Likewise, a defendant or potential defendant facing the prospect of a lawsuit that includes only claims for injunctive relief can agree to settle the matter by paying a sum of money. Thus, the fact that Columbia has agreed to pay the U.S. money that it otherwise couldn't have been ordered to pay is not, by itself, problematic.

But what justifies the size of the settlement? A simple-minded way to think about it goes like this: The Trump administration had canceled $400 million in grant funding to Columbia, so by paying $200 million in exchange for the restoration of that funding, Columbia and the U.S. were splitting the difference evenly. In (this simple-minded) calculation, Columbia and the Trump administration could have each concluded that there was a 50-50 chance that the cancellation would be upheld in the courts, so a payment of half of what was at risk is about right.

That's simple-minded in both directions, however. First, Columbia actually agrees to pay another $21 million into a claims fund per an agreement with the Equal Employment Opportunity Commission. And on top of that, Columbia agrees to pay various costs associated with implementing the agreement. So from that direction, it looks like Columbia is paying more than half of the $400 million that was withheld.

But the other side of the ledger is actually much larger.  The cancellation of $400 million was arbitrary. As the NY Times story linked above reports: "Columbia receives about $1.3 billion in federal research grants annually, and the university said it would have all been at risk if it had remained on the White House’s blacklist." Moreover, there was the prospect of losing not only that $1.3 billion but of Columbia researchers being denied future grant funding for the duration of the Trump administration. Seen against that backdrop, Columbia has agreed to give up a little over $221 million to ensure something on the order of $4 billion.

Is that a good deal or a bad one? I suppose it depends on one's baseline. The Trump administration was withholding $175 million in funding from the University of Pennsylvania. To get that funding restored, Penn entered into an agreement with the government under which it didn't have to pay a penny. It did, however, agree to sell its soul by accepting highly transphobic terms that rely on an extremely tendentious reading of Title IX. The Columbia agreement also contains language related to women's sports (in paragraph 20 on page 9), but it does not expressly adopt the Trump administration's anti-trans definition of women in the way that the Penn agreement does. And although Columbia agreed to many intrusive (and in my view objectionable) terms with respect to other matters, it did secure (in paragraph 5 on page 3) language stating that the agreement does not give the government any "authority to dictate faculty hiring, University hiring, admissions decisions, or the content of academic speech." I don't have any information about the negotiations process, but it's possible that, unlike Penn, Columbia agreed to a financial sacrifice in order to preserve some measure of autonomy (and self-respect).

Even so, one might think that the $221-million-plus figure is excessive, given the lack of any legally mandated process or any real finding of culpable conduct. I would push back against that conclusion. A fair assessment of how much money Columbia could lose from a vindictive Trump over the next three years (the duration of the agreement) is about $4 billion. The settlement cost Columbia under six percent of that. Can anybody say with confidence that Columbia's likelihood of succeeding in litigation was 94 percent or better--which it would have to be to make the settlement amount too high?

Although I think that the Administrative Procedure Act, properly understood, clearly allows funding recipients like Columbia--and more to the point, Harvard--to sue directly to enjoin unlawful funding cuts, the Trump administration has some reason to think that the Supreme Court will be receptive to its argument that, under the Tucker Act, universities must sue for breach of contract in the Court of Federal Claims. Moreover, the Supreme Court has showed a remarkable willingness to allow the Trump administration to proceed with its hardball policies by dissolving lower court preliminary injunctions. The prospect of years-long delay and escalation by the administration makes the six percent figure seem almost like a bargain.

It's against that background that I told the Chronicle of Higher Education yesterday that in purely financial terms, Columbia got a good deal. Here's the key paragraph:

“Columbia couldn’t tolerate the administration holding up billions of dollars in current and future grants, so they paid what is essentially ransom,” said Michael C. Dorf, a professor of law at Cornell University. “The ransom that they ended up paying strikes me as a pretty good value if you decide you’re going to pay ransom. But the problem with paying ransom is that it incentivizes the taking of more hostages.”

And there's the rub. As David Pozen explains, "regulation by deal" is a deadly threat to the rule of law. Trump is running the same play against higher education that he has run against law firms and news organizations: bring frivolous lawsuits and sign preposterous executive orders knowing that the targets will likely capitulate because, even though they almost certainly have the law on their side, they do not have the resources to wait for the wheels of justice to turn slowly. The targets also know that Trump will pretextually use other levers of government power to retaliate against them if they resist.

Given all of that, it's horrible but unsurprising that law firms, news organizations, and now two Ivy League universities have capitulated and thus encouraged more extortion from the Bully in Chief. What is remarkable is that any entities have resisted. Hats off to Perkins Coie, Jenner & Block, WilmerHale, Susman Godfrey, and--at least for now--Harvard University and the Wall Street Journal. But without a united front, the shakedowns will continue.