On August 11, 2023, the United States Court of Appeals for the Third Circuit issued a precedential opinion in response to students’ claims for tuition refunds related to effects of the COVID-19 pandemic. Will this decision open the floodgates for more lawsuits?
“Like many colleges and universities across the country, the University of Pittsburgh and Temple University responded to the novel coronavirus pandemic by transitioning to remote learning in March 2020,” says Circuit Judge Cheryl Ann Krause.
Though many accepted and adapted to remote learning environments, some students felt deprived of the “traditional” education promised at the start of their collegiate journey.
Of those students who felt deprived, former University of Pittsburgh and Temple University (the “Universities”) students (the “Students”) filed lawsuits against the Universities seeking partial refunds of tuition and fees on the grounds that they received a materially different educational experience than they were promised.
Facts of the Case
The Students enrolled in the Universities’ traditional on-campus programs for the Spring 2020 semester. To complete their enrollment, the Students were required to (1) pay tuition and mandatory fees; and (2) sign a Financial Responsibility Agreement (“FRA”).
Through this process, the former University of Pittsburgh students paid a student activity fee, a wellness fee, a computing and network services fee, as well as a security, safety, and transportation fee. Temple University charged its former students a “University Services” fee that funded numerous on-campus services and applied only to in-person students. Some of the Students at both Universities also pre-paid housing and dining fees.
The Universities’ semesters began as intended on January 6, 2020, but were short-lived, as students were informed on March 11, 2023, that classes would be conducted online for the remainder of the semester.
At the Trial-Level
The Universities did not reduce tuition or mandatory fees paid by the Students, which led the Students to file lawsuits against their respective universities. Ultimately, the District Courts granted the Universities’ motions to dismiss for “failure to state a claim”.
Failure to state a claim is a legal defense asserting that even if all the factual allegations in a complaint are true, the claimant insufficiently established a cause of action and the case should therefore be dismissed.
At the Appellate-Level
Dissatisfied with the trial courts’ dismissals, the Students appealed their cases against the Universities for breach of contract and unjust enrichment, which were consolidated for review.
To support their claims, the Students alleged that they “paid tuition for a first-rate education and educational experience” but “were provided with a materially different product” and likewise “paid fees for services and facilities which are simply not being provided.”
The basis for these arguments is rooted in contract principles. In this case, the Students argue that the terms of their contracts were not upheld by the Universities.
What the Third Circuit refers to as the “crux” of the Universities’ argument on appeal is the FRAs signed by all of the Students, which they claim are “express integrated contacts that specifically govern tuition, fees, educational services, and refunds.”
Simply put, the FRAs obligated the Students to timely pay tuition and fees. Additionally, they provided the Universities with certain collection rights if those payments are not made.
Third Circuit Court is Unpersuaded
In its opinion, the Third Circuit Court found that FRAs do not foreclose the Students’ implied contract and unjust enrichment claims. Rather, “the FRAs function as promissory notes that detail only the Students’ obligations to pay tuition and do not set forth the Universities’ corresponding obligations.”
The Court found no express contract precluding the Students’ implied contract or unjust enrichment claims, and therefore next considered whether each of the claims were sufficiently pled.
Students Satisfactorily Alleged Breach of Implied Contract
Generally, in Pennsylvania, “a contract implied in fact is an actual contract which arises where the parties agree upon the obligations to be incurred, but their intention, instead of being expressed in words, is inferred from acts in the light of the surrounding circumstances” .
The Third Circuit Court recognized the Students’ assertion that the Universities frequent reference to in-person activities and instruction creates an implied contract for in-person education, which is sufficient to state a claim for breach thereof.
Students Satisfactorily Alleged Unjust Enrichment
Finally, the Third Circuit Court considered whether the Students presented legally sufficient unjust enrichment claims. Pennsylvania law bars unjust enrichment claims when a contract—express or implied—governs the parties’ relationship, however, the Students’ can plead such because the applicability of a contract is in dispute .
To state a claim for unjust enrichment under Pennsylvania law, a plaintiff must allege that (1) the plaintiff conferred a benefit on the defendant; (2) the defendant appreciated that benefit; and (3) the defendant retained the benefit under circumstances where it would be inequitable to do so without payment of value.
The Third Circuit Court found that the Students sufficiently met all three requirements, emphasizing that it was not unjust that the Universities shut down, but it was unjust that the Universities did not refund the Students’ tuition or fees (even partially).
Third Circuit’s Conclusion
The Court concluded that “the Students have adequately pleaded damages.” To support this decision, Judge Krause wrote, “not only do they allege that they did not receive the type of education that they purportedly bargained for, which costs more and comes with different benefits than online learning…they also allege that they did not receive specific university services while the campuses were shut down.” All but one of the claims were reversed and remanded for further proceedings.
What Does the Future Hold for Higher Education?
The Third Circuit Court has published a precedential opinion, which may open the floodgates for litigation against schools which breached implied promises and were unjustly enriched when transitions were made to remote learning.