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D.C. Circuit Un-rings Dismissal Bell on Shutdown-Era Class Actions Seeking Tuition Refunds, but Signals Tough Examinations Ahead

Two years ago, universities around the world paused in-person classes and quickly transitioned to online learning in response to government shutdown orders, and to protect students, faculty, and staff from the potentially deadly effects of contracting COVID-19. The quick switch allowed students to obtain course credit and remain on track for degrees, notwithstanding the world changing around them.

While many students were thankful, others filed putative class-action lawsuits against their universities, seeking refunds for tuition that they had paid at the beginning of the semester, before the enormity of the pandemic was contemplated. The class-action plaintiffs claimed that their universities denied them contractually-owed in-person experiences, and, alternatively, that the universities were unjustly enriched by keeping the full tuition payments. See, e.g., Church v. Purdue Univ., No. 4:20-cv-00025 (N.D. Ind. Apr. 2020). The students sought orders requiring the universities to disgorge the alleged difference in value between the online education that they received and what would have been provided in-person had the pandemic never happened.

In the ensuing two years, with much of life still conducted online because of COVID-19, many of these suits have been dropped. Some were affected by immunity statutes that shielded universities from liability for transitioning to remote learning during the height of the pandemic. See N.C. Gen. Stat. § 116-310, et seq. While some suits have survived the pleadings stage, others have been dismissed by trial judges who concluded that the students’ allegations failed to demonstrate any contractual or other violations by the universities. 

Such had been the fate of putative class actions filed against American, Georgetown, and George Washington Universities. In the spring of 2021, one year after the pandemic hit, federal district court judges in Washington, D.C. dismissed several lawsuits filed against these universities. See Shaffer v. George Washington Univ., No. 20-1145 (D.D.C. Mar. 2021); Crawford v. Presidents & Dirs. of Georgetown Coll., Nos. 20-cv-1539, 1886, 1141, 1454, and 1555 (D.D.C. May 2021).

The district judges, applying D.C. law, concluded that the plaintiffs’ allegations failed to show an express contract to provide in-person instruction. The judges noted that an express contract existed between the students and the universities, but this contract did not govern, one way or the other, whether instruction had to be provided in person. One of the judges acknowledged university materials “touting the vitality of the campus experience,” but concluded that these materials did not “definitively promise” the experience touted. The students’ allegations, another judge remarked, did not support a plausible inference that the universities “promised away their discretion to make reasonable modifications in response to radically changed circumstances, such as moving classes online to keep students and faculty safe during the deadly and uncertain early months of a once-in-a-century pandemic.” Instead, it appeared that “the parties bargained for a presumption of in-person education but preserved the universities’ right to suspend campus-based instruction if they had a good-faith reason to do so.”

The district judges also dismissed the plaintiffs’ unjust enrichment claims, concluding that such claims were barred where a contract existed between the parties. One of the judges concluded, alternatively, that even if an unjust enrichment claim were viable in these circumstances, the claim still would fail because there was no allegation that the move to online learning in 2020 was anything but reasonable in the face of the pandemic. Thus, the plaintiffs could not show that the universities’ retention of the full tuition paid for the spring 2020 semester was unjust. The district court also dismissed claims for certain fee refunds, but the fee claims are not the focus of this post and are not discussed further.

The American and George Washington University plaintiffs appealed, and the D.C. Circuit largely reversed, reinstating the claims for tuition refunds. Shaffer v. George Washington Univ., No. 21-7040, (D.C. Cir. Mar. 8, 2022). The D.C. Circuit agreed with the lower courts that the plaintiffs’ allegations did not show an express contract to provide in-person instruction. However, the panel concluded that the plaintiffs’ allegations sufficiently showed an implied-in-fact contract to provide in-person classes. According to the D.C. Circuit, at least at the pleadings stage, university publications touting the benefits of the on-campus experience—combined with the lower tuition prices traditionally charged for courses offered in online-only format and the historic practice of providing in-person instruction for students who pay the higher tuition rate—supported an implied-in-fact contract.

The D.C. Circuit also reversed the dismissal of the plaintiffs’ unjust enrichment claims, concluding that, if the plaintiffs ultimately did not prove that an implied-in-fact contract existed for in-person instruction, then an unjust enrichment claim would be viable. The Court noted, as did the district court, that an express contract undeniably existed between the parties. However, because the express contract did not govern whether instruction had to be provided in-person, it did not bar an unjust enrichment claim on this issue. 

The D.C. Circuit’s reasoning was fairly brief, and focused mostly on the principle that the plaintiffs’ allegations must be construed in their favor at the dismissal stage. The Court said nothing about whether the putative classes could or would be certified under Rule 23, and hinted that the road ahead would not be easy for the plaintiffs. 

For one, the D.C. Circuit noted that the defendants had various defenses to the plaintiffs’ allegations, including that performance under the alleged implied-in-fact contracts was impossible or impractical, and that the pandemic discharged any duty to provide in-person instruction. Unlike the district judges, who reasonably considered the real-world circumstances in evaluating the plaintiffs’ contract claims, the D.C. Circuit remarked that the universities had not raised the defenses on appeal and these real-world issues thus were not before the appellate court.

The D.C. Circuit acknowledged, however, that these considerations would present challenges on remand, especially for the plaintiffs’ unjust enrichment claims. The Court noted that it was “sympathetic to [the] realities” of the COVID-19 pandemic, and that no one was claiming that the universities “acted with a purpose to cheat their students.” Nonetheless, it concluded that determining whether the universities were unjustly enriched by failing to refund tuition based on the value of what was provided was a “fact-intensive question,” which was inappropriate for resolution at the pleadings stage. How the plaintiffs could establish this fact-intensive inquiry on a class-wide basis, the D.C. Circuit did not attempt to address.

Finally, the appellate court noted the defendants’ arguments that plaintiffs could not show damages, and that doing so would require the courts to subjectively value the education provided, which is prohibited under D.C. law. The D.C. Circuit concluded that it did not need to get into damages to decide whether the plaintiffs alleged a claim for breach of contract. While the Court noted that the university defendants historically have charged less for classes offered exclusively online, it identified no ready way to determine the value of the education actually received by each student, much less on a class-wide basis.

All in all, the D.C. Circuit’s decision un-rings the dismissal bell for the putative class actions filed against Washington, D.C. universities, but hints at tough examinations ahead for plaintiffs, at class certification and other stages of the litigation.

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March 17, 2022 Michelle A. Liguori
Posted in  Case Updates