Tuition refund class actions: The latest COVID-19 casualty

Nowhere is the COVID-19 virus mutating more quickly than in the cozy confines of class action litigation. From business interruption, to gym memberships, to disappointed Airbnb hosts, more and more Americans are turning to Rule 23 to recover losses that are as unprecedented as they were unpredictable.

The halls of higher education have not been spared. On March 27, 2020, the first college tuition refund class action lawsuit was filed in a federal district court in Arizona. The second suit came 12 days later in a federal district court in South Carolina. Since then, at least 60 class actions have been filed in federal and state courts across the country, and more are coming.¹

Yet, what distinguishes the tuition refund cases from other class litigation is that the plaintiffs didn’t actually lose anything. Their main complaint is that the innovative transition from live to online learning that was necessitated by campus closures in response to nationwide civil shutdown orders deprived students of the benefit of their bargain: live interaction in a diverse campus community. 

While the merits of these claims are dubious, there is one thing that these class action lawsuits—like their class members—have in common: they could not be more different.

Here is a brief overview of the key issues.

The claims 

Most of the lawsuits allege three types of claims under three types of theories. 

The class plaintiffs seek refunds for the pro rata portion of (1) unused room and board fees; (2) various student activity fees; and (3) tuition. 

The lawsuits assert three common theories of recovery: (1) breach of contract; (2) unjust enrichment; and (3) conversion.

The premise 

Each of these class actions is based on the same premise: Tuition for in-person instruction is higher than for online institutions, because it covers more than the academic instruction. Tuition also includes the costs of:

• face to face interaction with professors, mentors and peers
• extracurricular activities, social development and independence
• hands-on learning and experimentation
• networking opportunities

The damages

The intangible nature of the alleged drivers of the increased costs helps to explain the variation in damage models. 

• One case seeks the pro rata difference between the cost of on-campus tuition and online degree offerings in the same major. See, e.g., Student A v. Board of Trustees of Columbia University in the City of New York, Case No. 20-cv-03208 (S.D.N.Y. April 23, 2020).
   
• Another case seeks “return of the monies paid for the Spring 2020 semester” based on “the difference between one half of one semester of instruction on online distance platforms versus one half of one semester of live in-person instruction in brick and mortar class rooms.” Church v. Purdue University, et al., Case No. 4:20-cv-00025 (N.D. IN. April 9, 2020), Compl. 80. 
   
• Still others, perhaps wisely, do not articulate any damage theory at all. These cases simply ask for damages “in an amount to be ascertained by the jury at the trial of this action . . .” See, e.g., Rickenbaker v. Drexel University, Case No. 2:20-cv-01358 (D.S.C. April 8, 2020).  

While some of these damage theories demonstrate their authors’ gift for fiction, they are as uncertain as the virus that inspired them. Yet the uncertainty of damages may not be the greatest impediment to class certification. It is the difference in the injuries reflected by these theories that may ultimately doom these classes.

Prepare/plan/be prudent

As colleges and universities wait and wonder whether they will be next, there are several steps to take now that will help to defend your institution.

• Protect the privilege. Every phase of pre-litigation investigation should be coordinated through in-house and/or outside counsel. Exercise caution in deciding when—and if—to speak with other institutions.
   
• Prepare responses and talking points to address student, parent and media inquiries. This is a crisis. Engage in crisis management protocols.

• Identify any refunds/credits that would be appropriate in light of the closure, if you have not already done so.

• Survey course catalogues, student handbooks and social media posts to identify the types of statements that could be used to support the existence of a contractual promise.
   
• Identify published statements or writings expressing views regarding online distance teaching platforms (including any scholarship that may have come from your own faculty!).
   
• Engage accounting and operational personnel to evaluate exposure, as well as the basis for tuition, room and board, and student activity fees. The operational facts behind these costs may reveal defenses to class claims.
   
• Consult with counsel for coverage advice, and consider the consequences of coverage.  Your carrier may have the right to select counsel for you, which may not be counsel of your choice. And remember, counsel selected by your carrier will not be able to represent you should there be a coverage dispute.
   
• Monitor social media. Some class action targets have shaped an emerging narrative because they were thoughtfully engaged in, and had a strategy for addressing concerns.