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An Alabama judge dismissed Birmingham-Southern College's lawsuit against the state treasurer over a loan denial on Wednesday, a decision that could put the future of the 167-year-old private college in jeopardy.
Birmingham-Southern College filed a lawsuit last week against state Treasurer Young Boozer, saying Boozer wrongly denied a $30 million loan from a program created by lawmakers to provide a financial lifeline to the college. Montgomery Circuit Judge James Anderson granted the state's request to dismiss the lawsuit Wednesday on the grounds that the state treasurer could not be sued for exercising his duties. Anderson said the legislation gave discretion to the treasurer to decide who qualified for a loan.
"I'm sympathetic to the college and the position they are in, but I'm looking at the legislative language," Anderson said.
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Birmingham-Southern College was denied for the loan on Oct. 18.
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Birmingham-Southern is exploring an appeal to the Alabama Supreme Court, college President Daniel Coleman said in a statement. The college had argued it met the loan requirements set out in the law and that Boozer was acting in bad faith or under a misinterpretation of the requirements.
"Our good faith was betrayed over the several months of working with Treasurer Boozer to deliver this bridge loan to the college," Coleman said. "The timeline of our interactions clearly demonstrates that his behavior was arbitrary and capricious. We also believe he is misinterpreting the language of the act pertaining collateral."
The Alabama Legislature created the Alabama Distressed Institutions of Higher Education Revolving Loan Program this year after Birmingham-Southern officials, alumni and supporters lobbied for money to help the college stay open. Supporters of the loan legislation said it was a way to provide bridge funding while the college worked to shore up its finances.
Birmingham-Southern applied for a loan and was told by Boozer on Oct. 18 that the loan was being denied.
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The college will likely close without emergency relief from the court, lawyers wrote in the lawsuit. The private college, located a few miles from downtown Birmingham, has 731 full-time students and 284 employees.
The legislation set off criteria for qualifications for the loan, including that an institution had sufficient assets to pledge as collateral. The lawsuit accused Boozer of trying to settle a "grudge" against a bank that had loaned the college money and that during legislative discussions "focused on the collateral the College would pledge as security for the loan, including subordinating the first position of ServisFirst Bank in the college’s physical assets."
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During a hearing Wednesday, Deputy Attorney General Jim Davis, representing the state treasurer, said the college was seeking to have the judge supplant his judgement for that of the state treasurer.
"The application has been looked at," Davis said. "Whether the assets were sufficient, that requires judgement."
Republican State Sen. Jabo Waggoner, of Vestavia Hills, sponsored the legislation creating the loan program and said the intent was for the money to go to help Birmingham-Southern. He said the loan denial likely puts the future of the college in doubt.
"I'm hearing from a lot of people. Some are crying. Some are angry," Waggoner said. "Of course, I'm very disappointed, too, and I don't understand it."
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