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Full title: Motion objecting to claim(s) 103 of Mercedes Martin filed by Debtor 1 Minnesota School of Business, Inc.. An affidavit or verification, Proposed order. Hearing scheduled 6/15/2021 at 01:30 PM at Courtroom 2B, 2nd floor, 316 North Robert Street, St. Paul, Judge William J. Fisher. (Andre, Samuel) (Entered: 05/11/2021)

Document posted on May 10, 2021 in the bankruptcy, 11 pages and 0 tables.

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By this Motion, the Debtors seek an order disallowing and expunging in whole Claim No. 103 filed against MSB in Case No. 19-33629 (the “Claim”).The State filed Claim No. 95 against Minnesota School of Business in Case No. 19-33629, and Claim No. 9 against Globe University, Inc. in Case No. 19-33632.Minnesota School of Business, Inc. and Globe University, Inc. (the “Debtors”) move the Court for entry of an order disallowing and expunging Claim No. 103 filed against MSB in Case No. 19-33629 (the “Claim”).Based on the State of Minnesota’s authority to pursue the illegal lending claims on behalf of former students, the Debtors (1) object to the allowance of the duplicative Claim No. 103, and (2) seek entry of an order disallowing and expunging Claim No. 103 in its entirety.1 CONCLUSION For all of the foregoing reasons, the Debtors respectfully request that the Court enter an order disallowing and expunging Claim No. 103 as duplicative of illegal lending claims held and pursued by the State of Minnesota through the State’s Claim.

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA Jointly Administered Under Case No. 19-33629 (WJF) In re: Minnesota School of Business, Inc., Case No.: 19-33629 Globe University, Inc., Case No.: 19-33632 Chapter 11 Cases Debtors. NOTICE OF HEARING AND MOTION OBJECTING TO CLAIM (CLAIM NO. 103, CASE NO. 19-33629) TO: The entities identified in Local Rule 9013-3(a)(1): 1. Minnesota School of Business, Inc. (“MSB”) and Globe University, Inc. (collectively, the “Debtors”) move the Court for the relief requested below and give notice of hearing. 2. The Court will hold a hearing on this Motion at 1:30 p.m. on June 15, 2021, in Courtroom 2B, Warren E. Burger Federal Building and U.S. Courthouse, 316 North Robert Street, St. Paul, Minnesota 55101. The hearing will be held telephonically. Participants may dial in to the hearing using the following instructions: a. Dial 1-888-684-8852; b. When prompted, enter ACCESS CODE: 5988550; c. When prompted, enter SECURITY CODE: 0428. 3. Any response to the Motion must be filed and served not later than June 10, 2021, which is five (5) days before the time set for the hearing (including Saturdays, Sundays and holidays). UNLESS A RESPONSE OPPOSING THE MOTION IS TIMELY FILED, THE COURT MAY GRANT THE MOTION WITHOUT A HEARING.

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4. This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334, Fed. R. Bankr. P. 5005, and Local Rule 1070-1. This is a core proceeding. 5. This motion arises under 11 U.S.C. §§ 502 and 507, Fed. R. Bankr. P. 3001 and 3007, and Local Rules 3007-1 and 9013-1–3. This motion is filed under Fed. R. Bankr. P. 9014 and Local Rules 9013-1. 6. By this Motion, the Debtors seek an order disallowing and expunging in whole Claim No. 103 filed against MSB in Case No. 19-33629 (the “Claim”). The Claim was filed by a former student of the Debtors regarding loans that were determined to be illegal. Such claims are being pursued by the State of Minnesota pursuant to its parens patriae authority. As a result, former students holding duplicative claims like the Claim will recover through the State of Minnesota’s claim.1 BACKGROUND AND PROCEDURAL POSTURE I. The Debtors’ Bankruptcy Cases. 7. The Debtors filed petitions for relief under chapter 11 of the Bankruptcy Code on November 20, 2019 (the “Petition Date”). The cases are being jointly administered. 8. The Debtors continued in possession of their respective assets and the management of their business as debtors-in-possession pursuant to Bankruptcy Code sections 1107(a) and 1108 until entry of the Court’s order approving the appointment of Chapter 11 Trustee James A. Bartholomew (the “Trustee”) on May 13, 2020. 1 In this Motion, the Debtors seek the disallowance and expungement of the claim from the claims register. However, through this Motion, the Debtors are not objecting to the Claimant’s potential inclusion in the State’s notice and payment process described herein.

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9. The Court filed a Notice of Chapter 11 Bankruptcy Cases (Dkt No. 2) that, among other things, established March 18, 2020 as the deadline by which creditors must file proofs of claim. II. The State of Minnesota’s Claims Against the Debtors. 10. On March 13, 2020, the State of Minnesota (the “State”) filed Claim No. 952 against the Debtors (the “State’s Claim”).3 The State’s Claim provides that it has “statutory and parens patriae authority to enforce and pursue remediation for violations of Minnesota’s consumer-protection laws.” (Claim No. 95 at 4.) As further stated in the State’s Claim, the State pursued and obtained restitution orders against the Debtors, and the State is charged with sending notices and claim forms to eligible students. (Id. at 6–16.) In short, the restitution claims belong to, and are pursued by the State of Minnesota. 11. The State’s Claim against the Debtors is based on violations of Minnesota’s consumer protection laws and is further broken down into two categories: a. Violations of the CFA and DTPA. These claims relate to “false and misleading representations to prospective students, concerning, among other things, the employability of graduates of Debtors’ criminal-justice program.” (States Claim at 2.) b. Violations of Minnesota’s anti-usury and lender-licensing statutes. These claims relate to high-interest loans made by the Debtors to their students in excess of Minnesota’s usury rate and without a required lending license. (Id.) 2 The State filed Claim No. 95 against Minnesota School of Business in Case No. 19-33629, and Claim No. 9 against Globe University, Inc. in Case No. 19-33632. 3 Pursuant to a settlement agreement approved by the Court on December 22, 2020, the State’s Claim is currently allowed in the amount of $35,000,000. (Dkt. Nos. 322, 336.)

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III. The Claim Is Duplicative. 12. The Claim was filed on April 30, 2020, by Mercedes Martin (the “Claimant”). Pursuant to the claim form, the Claim seeks allowance of an unsecured claim in an unknown amount against MSB based on “money loaned and found to be fraudulently lended to me”. Attached to the Claim are loan statements related to Claimant’s institutional educational opportunity loans with the Debtors. 13. The Claimant was a prior student of the Debtors enrolled in their Associate of Applied Science Degree: Medical Assistant program beginning on April 2, 2007. As part of their enrollment with the Debtors, the Claimant signed an enrollment agreement; under that agreement, the Claimant waived any claims against the Debtor if not asserted via arbitration within twelve months of the date of the claim arose. The Debtors explicitly disclaimed any guarantee of employment for the Claimant in the enrollment agreement. The Claimant’s enrollment with the Debtors ended on December 23, 2010, at which time the Claimant earned their degree. 14. As a student, the Claimant received an institutional loan from the Debtors. The Claim appears to be based on the same allegations set forth by the State relating to the illegal lending claims asserted by the State against the Debtors. The Claim is therefore duplicative of the State’s Claim. 15. The Court acknowledged that the State of Minnesota sought restitution on behalf of former students “pursuant to Minn. Stat. § 8.31 and parens patriae authority,” which is a “quasi-sovereign power granted to the Minnesota Attorney General to act on behalf of citizens for their health and well-being.” [ECF No. 128 ¶¶ 1-2.] While Minn. Stat. § 8.31 contains a private right of action, the Minnesota Supreme Court has held that “the right of private litigant to

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bring a lawsuit under [section 8.31] is part of the broader authority of the State AG to bring a lawsuit . . . to enforce all remedies available to it, including the remedies under subdivision 3a [e.g., consumer restitution].” Curtis v. Altria Grp., Inc., 813 N.W.2d 891, 899 (Minn. 2012). Accordingly, the State conceded that “the [students’] claims are duplicative of, subsumed by, or ancillary to the State’s claim.” [ECF No. 156 ¶ 14.] 16. Disallowance of the Claim will result in a more streamlined and accurate claims register and eliminate the possibility of double recovery by the Claimant. To be clear, this Motion does not affect the State’s Claim for restitution and recovery on behalf of former students of the Debtors. RELIEF REQUESTED 17. The Debtors seek an order disallowing and expunging the Claim. 18. Pursuant to Local Rule 9013-2(a), this Motion is verified and is accompanied by a memorandum, proposed order, and proof of service. 19. The Debtors give notice pursuant to Local Rule 9013-2(c) that, if an evidentiary hearing is held as to this Motion, they may call (i) the Chapter 11 Trustee James Bartholomew, or (ii) Jeanne Herrmann, the former chief operating officer of the Debtors, to testify regarding the facts set out in this Motion. WHEREFORE, the Debtors respectfully request that the Court enter an order: A. Disallowing and expunging the Claim; and B. Granting such other and further relief as the Court deems just and equitable.

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Dated: May 11, 2021 /e/ Samuel M. Andre Clinton E. Cutler (#0158094) James C. Brand (#387362) Samuel M. Andre (#0399669) FREDRIKSON & BYRON, P.A. 200 South Sixth Street Suite 4000 Minneapolis, MN 55402-1425 (612) 492-7000 ATTORNEYS FOR THE DEBTORS

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA Jointly Administered Under Case No. 19-33629 (WJF) In re: Minnesota School of Business, Inc., Case No.: 19-33629 Globe University, Inc., Case No.: 19-33632 Chapter 11 Cases Debtors. MEMORANDUM OF LAW IN SUPPORT OF MOTION OBJECTING TO CLAIM (CLAIM NO. 103, CASE NO. 19-33629) Minnesota School of Business, Inc. and Globe University, Inc. (the “Debtors”) move the Court for entry of an order disallowing and expunging Claim No. 103 filed against MSB in Case No. 19-33629 (the “Claim”). The supporting facts are set forth in the verified motion (the “Motion”). All capitalized terms herein have the meaning ascribed to them in the Motion. For the reasons set forth below, the Claim should be disallowed and expunged in its entirety. BACKGROUND The Debtors refer to the facts stated in the Motion. LEGAL STANDARD A proof of claim filed in a bankruptcy proceeding is deemed allowed unless a party in interest objects. 11 U.S.C. § 502(a); see also Gran v. IRS (In re Gran), 964 F.2d 822, 827 (8th Cir. 1992). If an objection is filed, the objector must come forward with evidence rebutting the claim. Gran, 964 F.2d at 827; In re Oriental Rug Warehouse Club, Inc., 205 B.R. 407, 410 (Bankr. D. Minn. 1997). If the objecting party produces such evidence, the burden of proof shifts to the claimant to produce evidence of the validity of the claim. Gran, 964 F.2d at 827; Oriental Rug, 205 B.R. at 410. “In other words, once an objection is made to the proof of claim,

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the ultimate burden of persuasion as to the claim’s validity and amount rests with the claimant.” Oriental Rug, 205 B.R. at 410 (internal citations omitted). Section 502(b)(1) of the Bankruptcy Code in particular provides, in relevant part, that a claim may not be allowed to the extent that “such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law . . . .” 11 U.S.C. § 502(b)(1). OBJECTION The Debtors object to the allowance of the Claim as duplicative of the State’s Claim pursued on behalf of former students for recovery relating to the illegal lending claims, which belong to the State of Minnesota. State by Hatch v. Cross Country Bank, Inc., 703 N.W.2d 562, 570 (Minn. Ct. App. 2005); see also In re Taibbi, 213 B.R. 261, 267 (Bankr. E.D.N.Y. 1997) (state consumer protection agency’s “ability to enforce such claims on behalf of defrauded consumers in the state court leads this Court to conclude that it is the creditor to whom the debt is owed”). Based on the State of Minnesota’s authority to pursue the illegal lending claims on behalf of former students, the Debtors (1) object to the allowance of the duplicative Claim No. 103, and (2) seek entry of an order disallowing and expunging Claim No. 103 in its entirety.1 CONCLUSION For all of the foregoing reasons, the Debtors respectfully request that the Court enter an order disallowing and expunging Claim No. 103 as duplicative of illegal lending claims held and pursued by the State of Minnesota through the State’s Claim. 1 The Debtors do not waive any additional objections to the Claim that may arise as part of the claims objection process in the event the Claimant asserts additional bases for allowance of the Claim.

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Dated: May 11, 2021 /e/ Samuel M. Andre Clinton E. Cutler (#0158094) James C. Brand (#387362) Samuel M. Andre (#0399669) FREDRIKSON & BYRON, P.A. 200 South Sixth Street Suite 4000 Minneapolis, MN 55402-1425 (612) 492-7000 ATTORNEYS FOR THE DEBTORS

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MINNESOTA Jointly Administered Under Case No. 19-33629 (WJF) In re: Minnesota School of Business, Inc., Case No.: 19-33629 Globe University, Inc., Case No.: 19-33632 Chapter 11 Cases Debtors. ORDER GRANTING MOTION OBJECTING TO CLAIM (CLAIM NO. 103, CASE NO. 19-33629) This case is before the court on Minnesota School of Business, Inc. (“MSB”) and Globe University, Inc.’s (collectively, the “Debtors”) Motion Objecting to Claim (Claim No. 103, Case No. 19-33629) (the “Motion”). Based on the Motion and the file, IT IS ORDERED: 1. The motion is granted. 2. Pursuant to section 502(b) of the Bankruptcy Code, Claim No. 103, Case No. 19-33629, is hereby disallowed and expunged in its entirety. 3. The disallowance and expungement of Claim No. 103 does not constitute any admission or finding with respect to any other claim in these cases. 4. The Debtors and the Trustee are authorized to take any and all actions that are necessary and appropriate to give effect to this Order. DATED: ______________________________ William J. Fisher United States Bankruptcy Judge

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