Analysis: Win or lose, Labrador’s lawsuit has already jeopardized the Phoenix sale

Kevin Richert, IdahoEdNews.org

MOSCOW (IdahoEdNews.org) — A nonbinding deadline came and went softly past week — pinch nan University of Idaho’s $685 cardinal scheme to threat up nan University of Phoenix still successful play, but very overmuch successful jeopardy.

There are 2 large reasons nan parties couldn’t adjacent a woody by nan May 31 voluntary opt-out date: guidance astatine nan Statehouse, and a slow-walking lawsuit.

That suit will return halfway shape again connected June 13, erstwhile Attorney General Raúl Labrador takes his lawsuit against nan State Board of Education to nan Idaho Supreme Court. The oral arguments will travel 359 days aft Labrador first revenge his lawsuit, alleging nan State Board’s closed-door discussions of a Phoenix acquisition violated Idaho’s unfastened meetings law.

No matter what happens successful tribunal adjacent week — and really and erstwhile nan Supreme Court’s 5 justices determine — nan suit has already delayed a acquisition that Labrador has openly questioned successful immoderate of his erstwhile ineligible filings. It will now beryllium tougher, if not outright impossible, for nan U of I to get a for-profit assemblage pinch 85,000 students, a half century’s acquisition successful nan online arena, and a litany of reputational problems.

The ineligible arguments haven’t changed overmuch since past twelvemonth — backmost erstwhile U of I and Phoenix officials expected to adjacent their blockbuster woody by early 2024. The suit centers connected nan State Board’s closed executive sessions that preceded its May 18, 2023, support of nan Phoenix deal. The Supreme Court briefs supply a refresher people of sorts.

Labrador challenges nan rationale for nan closed meetings: nan State Board’s declare that it was navigating a bidding warfare betwixt nan U of I and different suitors. Those closed-door meetings trim nan nationalist retired of nan process, giving commencement to nan contention that plagues nan woody now. “The request for nationalist consciousness whitethorn ne'er person been higher than pinch nan monolithic University of Phoenix transaction,” Joshua Turner, Labrador’s main of law litigation and policy, wrote connected May 20.

The State Board’s hired attorneys reason that Ada County District Judge Jason Scott sewage it correct successful precocious January, erstwhile he deemed nan closed meetings justified. The board’s ineligible squad says nan closed meetings served nan taxpayers, allowing Idaho to trim its champion deal. “If it was nationalist knowledge that nan University of Idaho was negotiating pinch nan University of Phoenix for a acquisition value of $685 cardinal … (another entity) could person swooped successful and offered $690 million,” Eric Stokes wrote successful a May 13 brief.

At its heart, this is a agelong ineligible process complete authorities transparency, and obviously, I’m not going to downplay nan value of that principle. But nan suit has already tangibly affected nan Phoenix purchase, bringing financing to a standstill.

Never mind that Labrador’s squad resoundingly mislaid successful Scott’s courtroom. Never mind nan plodding proceedings that was marked by hours of repetitive questioning of State Board members — and a bizarre hold caused erstwhile Labrador’s lead lawyer simply grounded to show up 1 morning, citing an illness. And ne'er mind that Scott said Labrador’s agency is responsible for $240,000 of State Board ineligible fees.

Labrador’s squad has struggled successful tribunal each measurement of nan way, but nan suit has kept buyers from issuing bonds to bankroll nan Phoenix purchase. Subsequently, nan Supreme Court entreaty has kept nan bonding process connected clasp for months.

No financing, nary purchase.

Whether you for illustration nan projected Phoenix acquisition aliases not — aliases whether you for illustration Labrador’s litigious modus operandi aliases not — location is nary disputing that this suit is simply a large logic why nan Phoenix acquisition totters connected shaky ground.

As Idaho EdNews reported first past week, Phoenix’s liking successful nan U of I could beryllium waning. Apollo Global Management, Phoenix’s owners, has suggested it is consenting to proceed to discuss pinch nan U of I — but Apollo besides wants to talk to different would-be buyers.

Apollo and nan U of I person agreed to support talking done astatine slightest nan extremity of June, nan U of I said past week.

Oddly enough, a nonexclusive process mightiness tease retired immoderate answers to 1 of nan large recurring questions from Labrador’s lawsuit: Is nan U of I nan only superior bidder for Phoenix, aliases are location others? The State Board and nan U of I person insisted that Phoenix was a basking commodity each on — moreover aft April 2023, erstwhile nan University of Arkansas’ committee of trustees voted against pursuing Phoenix. Labrador has suggested that nan specifications astir title were sketchy astatine best, and thing nan State Board conveniently utilized to warrant their closed-door meetings.

But a nonexclusive process would besides beryllium much of a nationalist process — moreover if Apollo and Phoenix remain, existent to form, tight-lipped astir immoderate talks pinch prospective buyers. It is now a matter of nationalist grounds really overmuch nan U of I is consenting to salary for Phoenix. Any different bidder knows nan U of I’s ceiling. Stokes’ script of a last-minute bidder swooping successful pinch a $690 cardinal connection isn’t retired of nan question.

The bottommost line: It will now beryllium considerably much analyzable for nan U of I to adjacent nan Phoenix deal.

Both houses of nan Legislature went connected grounds successful guidance to nan acquisition successful 2024, and there’s nary guarantee lawmakers will beryllium immoderate much comfortable pinch nan woody successful 2025. If nan Supreme Court sides pinch Labrador, nan State Board mightiness beryllium forced to spell done a do-over, and o.k. nan Phoenix woody each complete again — and effort to fig retired a governance building that would fulfill lawmakers’ concerns.

It should beryllium nary astonishment that Apollo — a motivated seller anxious to get Phoenix disconnected its books — would want to research different buyers. A twelvemonth of litigation and legislative guidance was astir apt nan past point Apollo had successful mind erstwhile it agreed to prosecute a waste to nan U of I.

In its desire to move on, Apollo has floated nan thought of paying “breakup fees” to thief screen nan $11 cardinal nan U of I has shelled retired for Phoenix owed diligence and consulting.

For nan U of I, that wouldn’t beryllium a way forward. Instead, it would beryllium an offramp.

A twelvemonth ago, an offramp was nan past point U of I officials had successful mind, arsenic they aggressively pushed and touted nan Phoenix megadeal. But a batch has changed since then, and it’s not changing back  — sloppy of what happens successful Supreme Court.

Kevin Richert writes a play study connected acquisition argumentation and acquisition politics. Look for his stories each Thursday.

More reading: Click present for much of our exclusive, in-depth coverage of nan projected Phoenix purchase.