The birth-mother called several lawyers who would not take her case. She contacted the student legal services of the university she attended. This is a state university in the same state where the adoption agency is licensed and the adoptive parents are residents.
My guess is that student legal services didn't represent the birth mother. Student legal services rarely do anything except provide advice -- if that. I've never heard of student legal services actually representing a student in court. It may, on the other hand, have been a free legal aid clinic that was staffed by members of the law school.
Four days before the trial, the birth-mother's lawyer emailed the adoptive parents' lawyer. The email stated that if the adoptive parents dropped the request for sanctions then the birth-mother's lawyer would dismiss the case.
If the adoptive parents' lawyer threatened sanctions against the birth mother's lawyer, then the birth mother's lawyer's offer to drop the suit in exchange for dropping sanctions was unethical and itself constituted sanctionable behavior.
Since the child is the most important aspect of the case, the adoptive parents absolutely agreed.
And it would have been unethical for the adoptive parents' lawyer to agree to that kind of settlement. A pox on both their houses, say I.
Can or should the adoptive parents sue to get this money back?
You can sue anybody for anything. You, however, want to know if you -- oh, I'm sorry, I mean the adoptive parents -- can win
that lawsuit. That I don't know.
The lawyer that represented the birth-mother is an employee of the state. Should the suit be against the state or the college?
You said that the adoptive parents dropped sanctions in order to settle the case. That may very well have been unethical, but that's what they did. And now they want to renege on that deal? Sorry, but nobody comes off looking good in this scenario, except perhaps the baby. God help that poor whelp.