United States: Post COVID-19 Considerations As Universities Open In The Fall

Major operational changes and disruptions occasioned by COVID-19 have created a swell of contract disputes and new litigation in various industries. The area of higher education is no different. Faced with safety concerns and government stay-at-home orders, universities across the nation have had to adjust, often by ceasing in-person instruction, transitioning to remote learning, and suspending on-campus services, including university-furnished student housing. These adjustments have been met with class actions filed by students seeking tuition and fee reimbursements or abatements. We have been monitoring these cases closely as they continue to flood into federal and state courts and have been counseling our clients on what they can expect, possible defenses, and mitigation of liability. We also note that the class actions that have been filed are specific to the Spring 2020 semester. Now that the 2019-2020 school year has wrapped up and universities, colleges, and higher education institutions begin to grapple with what to do in the fall, a closer look at these cases are warranted to potentially avoid another wave of class actions come September.

These suits generally contend that the student-class members have not received the college experience they bargained for, and most assert claims for breach of contract, unjust enrichment, and conversion. Importantly, however, universities hit with these class actions have available to them several potentially applicable defenses. First, to the extent the plaintiff alleges that the university has breached its obligations under an express agreement, quasi-contractual remedies, such as unjust enrichment, are generally not recoverable.¹ Because the theory of unjust enrichment is founded on a contract implied in law, if a valid, express contract governs the parties' relationship, unjust enrichment is not applicable.² Similarly, many courts hold that claims for conversion—a tort premised on wrongful appropriation of tangible property—is not actionable where the suit essentially involves a contract dispute.³ Because, like unjust enrichment, "a claim of conversion cannot be predicated on a mere breach of contract,"⁴ universities defending against class-action complaints asserting both breach of contract and unjust enrichment and/or conversion have colorable defenses that the latter claims fail as a matter of law, permitting potential disposition of these claims at the pleadings stage.

The defense of sovereign immunity may also provide for early disposition of some class actions. Public universities facing suit should consider whether they qualify for sovereign immunity—insulating them from damages awards—under the Eleventh Amendment. If the class action complaint seeks monetary relief and no waiver is applicable, dismissal on sovereign immunity grounds may be appropriate.⁵

The doctrines of impossibility of performance and frustration of purpose may also be available, as the ability to provide traditional instruction has been impeded by an event beyond universities' control. Impossibility typically discharges, in part, a party's contractual obligation when an unanticipated condition makes performance "objectively impossible,"⁶ and courts have applied the doctrine to the education context.⁷ Here, government stay-at-home orders have arguably rendered colleges' ability to provide in-person instruction and on-campus services truly impossible, potentially excusing the universities' alleged nonperformance. Under the related doctrine of frustration of purpose, colleges may also be able to argue that because the pandemic and ensuing government restrictions have so frustrated a "common object"⁸ of their contracts with students—contemplating in-person instruction—the universities' alleged failure to perform does not amount to a breach of contract. Relatedly, and depending on the language of written agreements, universities should also evaluate whether force majeure, or "act of God," provisions can be employed. It bears noting, however, that application of these defenses to the present situation—sweeping restrictions imposed as a result of a pandemic—has not been fully tested in the courts. We will note also, with respect to these defenses, two important points: (1) in many states, these are only partial defenses providing only an equitable defense, and (2) these doctrines are premised on the unforseeability of an event, and as institutions look to the new school year, the possibility of another wave of COVID-19 and another round of stay-at-home orders will likely be deemed foreseeable.

Finally, and perhaps most significantly, universities should enjoy some amount of deference from courts adjudicating these class actions. Many courts recognize that where a student pursues a contract action against a university based on an academic decision—such as adjusting curriculum in light of a serious health risk—"judicial intervention in any form should be undertaken with only the greatest reluctance."⁹ In this vein, many courts have been resistant to recognize "educational malpractice" as a cause of action.¹⁰ These jurisdictions have refrained from permitting such claims, whether brought in tort or contract, "on the premise that [u]niversities must be allowed the flexibility to manage themselves and correct their own mistakes."¹¹ Universities faced with class actions in the wake of COVID-19 may similarly be able to argue that breach-of-contract claims, which essentially allege that remote instruction is inadequate, amount to an "impermissible 'educational malpractice' claim in disguise."¹² Similarly, universities may argue that, in light of the judicial deference in how the schools choose to oeprate, the alleged breach is no breach at all because the schools continue to provide advancement towards degree, educational instruction and virtual programs such that the students are still getting the benefit of the bargain.

Indeed, courts have invoked the principle of judicial restraint in the higher education context when a university is forced to make changes due to an unanticipated event. In a 1971 New York case, the father of a university student sued for a tuition refund after classes were suspended following mass anti-war demonstrations.¹³ The trial court ruled in favor of the father, and the appellate court reversed, finding that the court below "erred in substituting its judgment for that of the University," and emphasizing that the university had the authority to make changes to maintain order on its campus.¹⁴ Although this New York case is somewhat dated, it is helpful for the proposition that when a supervening event affects a university's ability to provide the same or similar instruction or campus services, such as the case of mass anti-war protests or a pandemic, the university's reasonable adjustments to curriculum—even suspending classes—may not warrant tuition refunds or other monetary relief.

COVID-19 and resultant government orders have significantly changed the higher education landscape and that change is expected to last into the new school year. While all of these cases remain in their infancy, and there is no direction yet from the courts on the veracity of these claims, universities and higher education institutions can use these cases as a guide when discussing the new school year and take action now to mitigate against the possibility of future actions. Schools should review their marketing and online materials to include information about courses, services, activities, and offerings offered remotely. If certain activities, facilities, or offerings are not going to be available in the fall, reference to those items should be removed. Now is also the time to review and revise contracts and policies to determine whether revisions may be appropriate in light of COVID-19. For instance, universities may want to consider adding arbitration provisions, revising refund policies, and adding disclaimers about the accessibility of facilities, in-person classes, and other activities. Universities should also review their insurance policies and talk to their providers early on about what their coverage includes. Although there is no clear path forward yet, the reality is that the world around us is changing and it is important to make sure our businesses are changing with it.

Footnotes

1 See, e.g., No. 13-cv-3455, 2014 WL 1411249, at *2 (N.D. Cal. Apr. 11, 2014) ("[A] s a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract."); No. 11-2605, 2012 WL 3111679, at *8 (D. Md. July 30, 2012) ("[U] njust enrichment cannot be asserted when an express contract defining the rights and remedies of the parties exists."); 404 F. Supp. 2d 1023, 1029 (M.D. Tenn. 2005) (dismissing unjust enrichment claim where express contract existed);

2 See No. 03-c-2105, 2003 WL 21801190, at *2 (N.D. Ill. Aug. 4, 2003).

3 See, e.g., No. 213CV02671JTFCGC, 2014 WL 12887673, at *3 (W.D. Tenn. Oct. 17, 2014) (dismissing conversion claim as duplicative of breach-of-contract claim); No. 13-60384-civ, 2013 WL 4496504, at *5 (S.D. Fla. Aug. 20, 2013) (noting that, under both New York and Massachusetts law, "a plaintiff may not recover under both breach of contract and conversion for the same damages").

4 888 F. Supp. 2d 385, 397, n.8 (S.D.N.Y. 2012).

5 See, e.g., 837 F.2d 197 (5th Cir. 1988) (university protected from damages award in student suit alleging civil rights violations).

6 No. 01-civ-9104, 2003 WL 1960587, at *4 (S.D.N.Y. Apr. 25, 2003).

7 505 F.3d 1283 (D.C. Cir. 2007) (invoking impossibility doctrine in finding education provider's nonperformance under individualized education plan with student excused).

8 508 F.2d 377, 381 (2d Cir. 1974) ("Frustration of purpose excuses performance when a virtually cataclysmic, wholly unforeseeable event renders the contract valueless to one party.").

9 862 F.2d 570, 575 (6th Cir. 1988).

10 See, e.g., 55 Fed. App'x 308 (6th Cir. 2003) (disallowing claim sounding in educational malpractice); 304 F. Supp. 3d 656, 664 (S.D. Ohio 2018) (same).

11 926 F.2d 1029, 1034 (8th Cir. 2019) (internal quotations omitted).

12 304 F. Supp. at 664.

13 319 N.Y.S.2d 893 (N.Y. Ct. App. 1971).

14 Id. at 894.

Originally published by Seyfarth Shaw, on June 2020

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