Nasson College v. New England Association of Schools and Colleges

Nasson College (Nasson) (debtor), a private university located in Maine, filed for Chapter 11 Bankruptcy in November 1982. At the time of its filing, Nasson was accredited by the New England Association of Schools and Colleges (NEASC), a voluntary, self-governing organization. In spring 1983, Nasson decided to cease operations and end its educational programs. After speaking with a Nasson administrator, NEASC informed Nasson that it was terminating Nasson’s accreditation, citing Nasson’s decision to cease educational activities. In May 1983, NEASC officially voted to terminate Nasson’s accreditation. Nasson did not appeal the decision. The Chapter 11 bankruptcy court was not informed of the accreditation decision. Nasson’s educational activities were terminated by the end of the 1982-83 school year. In November 1984, the bankruptcy court issued a final order, mandating that Nasson be reorganized into a college by use of a reduced core campus. An agreement was entered into by Nasson, the creditors’ committee, and Edward Matter, an experienced operator of educational institutions. The agreement allowed Matter to assume control, provided that Nasson retained its degree-granting authority and charter. A final order was issued in March 1985, stating the Nasson was allowed to continue operating with the full degree-granting authority, privileges, and accreditations it had on the day it filed for bankruptcy. In September 1985, Nasson began offering educational programs again. NEASC insisted that because Nasson’s accreditation status had been terminated, it had to reapply and go through the accreditation process again. Nasson filed a complaint, arguing that NEASC violated the automatic stay inherent in § 541 of the United States Bankruptcy Code, which prevented the transfer of a legal interest that had become property of the debtor’s estate, notwithstanding an agreement to transfer the interest that was conditioned on the financial insolvency of the debtor. NEASC argued that Nasson’s accreditation status could not be considered property subject to § 541.