Institutions of Higher Learning Face COVID-Related Legal Challenges

The COVID-19 outbreak in the United States, beginning in the late winter and early spring of 2020, and continuing into 2021 and 2022 has caused major disruptions to America’s colleges and universities. These disruptions have affected everything from admissions and school closures to in-person learning and student financial aid, from campus housing and dining to college athletics. One of the major impacts of COVID-19 has been the exacerbation of ongoing financial struggles for colleges and universities, including the filing by students or their parents of numerous class action lawsuits seeking refunds of money paid for tuition, room and board, meals, facility use costs and other incurred costs alleged to have been wrongfully assessed during school closures and periods of remote learning. A review of the financial hardships facing IHL’s in the current environment reveals that although many of the class action suits filed in 2020 are being favorably resolved, outstanding issues remain, contributing to financial hardships for IHL’s from the pandemic that could last for many years to come.

In the spring 2020, the University of Washington became the first major IHL to close its campus to in-person classes and to shift instruction to online only classes. Over 4000 IHL’s in all 50 states followed suit, impacting at least 25 million students. While some re-openings or hybrid re-openings (limiting the number of students on campus) occurred in the fall 2020 semester, many IHL’s continued to offer classes via remote learning due to the emergence of the Delta variant of the COVID virus followed by the Omicron variant which led to new surges in outbreaks of the disease. Some students and their parents believe that these on-line classes do not satisfy the students’ admissions contract and have sued for refunds of monies paid for tuition, room and board and a range of other fees.

The reimbursement lawsuits have been filed against a wide range of IHL’s ranging from Ivy League institutions (Brown University and Columbia University ) to large public schools (the California State University System comprising 23 schools and Michigan State University ). The legal theories advanced in the suits to justify claims for tuition and fee reimbursement include alleged breach of contract and unjust enrichment.

Since IHL’s took steps to protect student health by closing their doors and reverting to remote education in some form or another, over 300 lawsuits have been filed seeking tuition and/or fee reimbursements. In case after case, most courts have dismissed claims for tuition reimbursements, rejecting legal theories advanced in support of those claims. Only a small minority of suits seeking partial tuition refunds have been allowed to proceed.

However, courts are overwhelmingly allowing claims for reimbursement of fees to move forward and some of those cases have been settled.

IHL’s have asserted several defenses to these actions including the argument that there is no formal contract between them and their students to provide a particular type of education. In support of this argument is the fact that IHL’s frequently do not require formal written tuition contracts, causing plaintiffs to resort to other documents to attempt to establish their breach of contract claims. Among these documents are course catalogs or other guiding documents that describe degree requirements. Alternatively, IHL’s defend these cases by arguing that they have not breached contracts, if any, with their students as they are providing educational services in exchange for payment of tuition and that the plaintiffs have suffered no harm as there is no diminution of value in the education they are receiving online versus what they receive in person. Absent identification of a specific contractual promise on the part of IHL’s to provide an on-campus education, this defense has generally been successful. In addition, IHL’s have been able to successfully defend these suits by arguing that it was impossible to perform any contract as agreed upon due to COVID-19. This defense is especially strong in states whose governments issued shut down orders. Similarly, the force majeure defense has helped IHL’s successfully defend these suits since force majeure operates to protect parties from liability when failure to perform is due to a catastrophic event beyond their control.

A federal court decision in October 2020 in a case filed against Northeastern University served as a guide to future outcomes in the traditional post-pandemic breach of contract/unjust enrichment cases. In the case of Chong v. Northeastern University, the plaintiffs claimed entitlement to reimbursement of tuition and fees due to the IHL’s breach of a contract with its students that specified that classes would be “taught within an assigned room in specific buildings.” Plaintiffs also alleged unjust enrichment on the part of Northeastern. The federal court in Massachusetts held that the university did not promise students in-person, on-campus learning after the COVID-19 pandemic forced it to resort to remote education. As a result, the district court largely dismissed the lawsuit brought by 2 students after Northeastern moved to remote instruction in March 2020. According to the court, the complaint did not “plausibly establish” that the parties’ contract included any right to in-person instruction. In granting in part the IHL’s motion to dismiss, the federal court also reasoned that remote learning provided “an adequate remedy” to the loss of an on-campus education. The court allowed the case to continue as to the single issue of whether the plaintiffs could seek reimbursement of certain other fees such as a student activity fee, a student center fee, and an undergraduate student fee.

Columbia University and Rutgers University both recently settled student claims for reimbursement. In a class action case, Columbia agreed to pay 30,000 class members 100% ($8.56 million) of their alleged damages arising from un-refunded fees for a portion of the 2020 remote learning semester. The settlement is pending approval of the federal court and included an additional $4 million to reimburse plaintiffs for administrative expenses, attorneys’ fees and class representative rewards. The claims for tuition reimbursement had been previously dismissed. Rutgers settled a student class action suit that had previously been dismissed and while on appeal, as the parties negotiated a $5 million settlement paid to 64,500 students who asserted rights to reimbursement for fees and tuition for the remote learning portion of the 2020 semester.

Despite their general success in the more expensive tuition reimbursement cases, some estimate that the pandemic has cost IHL’s at least $120 billion. As a result, many IHL’s have taken steps to reduce their budgets and many of the cuts may be permanent. For example, the University of Southern Florida announced that its college of education would become a graduate-only program to help with a $6.8 million budget gap, doing away with its undergraduate education program. Harvard University reported a $10 million deficit despite its $41.9 billion endowment. Though IHL’s have been dealing with a growing financial crisis caused by years of cuts to state funding and decreasing enrollment due in part to rising tuition costs, the pandemic has placed those issues in sharp focus and has increased the financial burdens IHL’s now face. According to the Chronicle of Higher Education, over 100 IHL’s have suspended graduate programs as a result.

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