COVID-19: Should you consider refunding tuition or fees?

Universities that have refunded less than 100 percent due to COVID-19 closures face the prospect of class actions
Hyongsoon Kim (left), Molly Whitman, Robert Pees and Anthony Pierce are lawyers in the litigation practice at Akin Gump Strauss Hauer & Feld LLP.
Hyongsoon Kim (left), Molly Whitman, Robert Pees and Anthony Pierce are lawyers in the litigation practice at Akin Gump Strauss Hauer & Feld LLP.

The novel coronavirus and its resultant disease (COVID-19) have caused a worldwide public health crisis. This crisis has hit the education sector particularly hard. Institutions that had touted the benefits of community-based learning have now shuttered most on-campus housing and services and transitioned to online classrooms.

There is no doubt that these measures were prudent and unavoidable. But how universities have managed the financial aspects of this process has become a central concern for students, many of whom have paid thousands of dollars in tuition and fees for the spring 2020 semester.

Read: 86 free higher ed resources during coronavirus pandemic

In general, most institutions have not refunded tuition; they may be suggesting or stating that online courses are reasonably equivalent to in-person instruction given the realities of the pandemic. Some have provided prorated or partial refunds of fees paid for on-campus housing, dining and other services that students can no longer access.

But universities that have refunded less than 100 percent of paid tuition and fees face the prospect of class actions—and some have already been filed. Within the last few weeks, students or those who paid fees on their behalf have filed class actions against well-known institutions across the country, including The University of Arizona, Purdue University in Indiana, Drexel University in Philadelphia, Liberty University in Virginia, and the University of Miami. As the pandemic drags on, toppling summer programs and threatening fall programs, more class actions are a certainty.

As the pandemic drags on, toppling summer programs and threatening fall programs, more class actions are a certainty.

Though the makeup of claims and putative classes will undoubtedly vary, the central question is this: Must an institution of higher learning refund any portion of the fees and tuition paid due to COVID-19 closures? Here, we tackle that question in the context of potential class actions. But how courts will answer the question remains to be seen.

Public vs. private institutions and related relief

Putative class representatives might assert claims for breach of contract, unjust enrichment, or conversion to recover tuition or fees for courses sent online or services terminated or restricted due to coronavirus. The complaints that have been recently filed allege that online classes do not sufficiently replace in-person instruction and the lifestyle experience on campus, or that it is improper to retain certain fees or tuition if the cost to provide the online courses is less than the cost to provide them on campus.

Whether these types of suits will gain any traction in court may depend on whether the defendant school is a public or private institution. In general, private colleges are subject to suit because they are treated as private entities that can sue and be sued. Accordingly, the suits filed against private colleges Drexel U, the University of Miami and Liberty U request the award of damages, among other relief.

Read: Why displaced college students are suing their schools

But some public universities may be able to counter damages claims by invoking the 11th Amendment’s sovereign immunity protection of states, which includes arms of the state, unless the state has waived that sovereign immunity via legislation. If the class action complaint against a public university seeks monetary relief and does not allege a statutory or other waiver of sovereign immunity, the complaint may be dismissed.

For this reason, plaintiffs suing public universities may attempt to seek injunctive relief commanding the university to disgorge certain funds rather than damages [Stewart v. Morgan State Univ., CIV.A. DKC 11-3605, 2013 WL 425081, at *4 (D. Md. Feb. 1, 2013)]. For instance, the suits against the Arizona Board of Regents (the governing body for the public universities of The University of Arizona, Arizona State University and Northern Arizona University) and public Purdue University and its Board of Trustees do not request the award of damages per se, but rather request injunctions declaring that the defendants have wrongly withheld funds that should be returned to the students and enjoining the defendants from continuing to retain such funds.

It is questionable, however, whether a court would support this approach, or whether it would dismiss the suit as improperly characterizing a claim for monetary relief as a claim for injunctive relief.

Read: How to help higher ed (and students) stay solvent

Strategies to defend early

In addition to the financial impact of defending against these putative class actions, universities will undoubtedly suffer political and reputational damage the longer these cases remain active. Therefore, obtaining early dismissal or defeating class certification is important.

Both private and public universities may have strong arguments for dismissal in federal court [Rule 12(b)(6)]. Standard pleading defenses may also apply, such as the failure to properly plead a breach of contract claim (under Rule 8). Even where plaintiffs plead the existence of a valid contract, several affirmative defenses may apply, including the application of contractual force majeure or act of God provisions.

In a time when the World Health Organization has declared a “public health emergency of international concern,” defendant universities may have a strong argument that performing under any purported contract has become impossible. At the same time, moving courses online will arguably support a showing that universities have mitigated the situation to the best of their abilities. Moreover, if the university has stated a refund policy in its materials, a court may find those materials binding on students.

Read: Is there insurance coverage for campus housing closures?

No matter how plaintiffs choose to frame their claims, if they survive a motion to dismiss they must still satisfy Rule 23 for the class action to be certified. Where plaintiffs claim that students are entitled to prorated refunds based on the inability to use services, for example, determining which services each student paid for and how much they used those services prior to campus closures will be a highly individualized inquiry that precludes class certification.

Plaintiffs may struggle to show that the class members have suffered a common injury because the type and amount of fees paid for various services may depend on any number of factors, such as whether the student chose to live on or off campus or whether any amount of the services or tuition were paid for by other sources such as grants or scholarships. The currently filed cases have yet to mention another cadre of students: those participating in half- or full-year study abroad programs who have had those programs cut short. Those students will have entirely different financial burdens and logistical issues in completing their year of study.

These nuances could help convince a court that no class can be certified because each student’s agreements with the university must be analyzed independently.

Just as COVID-19 has altered the postsecondary educational landscape, so may it alter the jurisprudence of class actions filed against public and private universities. As more and more petitions arise calling for schools to refund payments or provide financial assistance to students, it is to be expected that more class actions will not be far behind. While universities have been undeniably impacted by the pandemic, how courts handle these class actions that are in many ways the first of their kind will have a lasting effect on university relationships with their students.

Hyongsoon Kim, Molly Whitman, Robert Pees and Anthony Pierce are lawyers in the litigation practice at Akin Gump Strauss Hauer & Feld LLP.

UB’s coronavirus page offers complete coverage of the impacts on higher ed.

Most Popular