NC Chamber supports UNC System in COVID shutdown refund dispute

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  • The NC Chamber's legal institute is supporting the University of North Carolina System in its fight against a lawsuit seeking refunds related to campus shutdowns during the COVID-19 pandemic.
  • University lawyers have estimated potential damages in the case of $260 million. A 2020 state law was designed to shield UNC from legal liability.
  • The chamber's proposed friend-of-the-court brief argued that lower court rulings favoring UNC "will allow our state’s businesses, institutions, and individuals to count on the General Assembly’s assurances of reasonable liability protections during times of crisis."

North Carolina’s largest business lobbying group is siding with the University of North Carolina System as it fights a lawsuit seeking partial refunds tied to COVID-related campus shutdowns in spring 2020.

Plaintiffs in the case Dieckhaus v. Board of Governors of UNC challenge a 2020 state law designed to shield the university from legal liability of an estimated $260 million. Lower courts have ruled in favor of the university. The state Supreme Court agreed in December to hear the case.

The NC Chamber Legal Institute filed paperwork Monday to file a friend-of-the-court brief with the state’s high court. The brief supports the state Appeals Court’s ruling favoring UNC.

The chamber’s legal arm “exists to promote and improve North Carolina’s business and economic-development climate. The decision below advances that goal,” wrote NCCLI lawyers.

“Affirming the decision below will allow our state’s businesses, institutions, and individuals to count on the General Assembly’s assurances of reasonable liability protections during times of crisis,” according to the court filing.

“[T]he General Assembly’s decisions in the emergency stages of an unprecedented public-health crisis are entitled to substantial judicial deference,” NCCLI lawyers argued. “[T]he statute in this case serves a rational legislative interest and therefore does not violate Appellants’ constitutional rights.”

The $260 million figure appeared in a brief the UNC System filed May 13 with the state Supreme Court.

“In May 2020, Plaintiffs filed this class action, alleging that the Board of Governors of the University of North Carolina (the ‘University’) breached implied-in-fact contracts with them when it moved to online instruction in the spring of 2020 in response to the COVID-19 pandemic,” lawyers representing the BOG wrote. “Although Plaintiffs acknowledge that the University acted reasonably in continuing to educate students by successfully transitioning to remote education, Plaintiffs nonetheless demand more than $260,000,000 in damages from the University for having done so.”

“In June 2020, the General Assembly recognized that the University had fulfilled its educational mission in good faith at the onset of the pandemic,” the court filing continued. “The University — by successfully implementing virtual learning to allow students to complete their courses amidst the pandemic — had faithfully performed whatever obligations it might have owed; Plaintiffs were entitled to nothing more.”

The General Assembly enacted the “Immunity Statute” to protect UNC and private colleges related to shutdowns during the spring 2020 semester. “At that time, the General Assembly was also facing an economic emergency caused by the pandemic, and it needed to safeguard the public fisc,” BOG lawyers wrote. “Therefore, the legislature would not open the doors of the state treasury to satisfy Plaintiffs’ novel claims.”

The high court could decide whether the law designed to shield the university from COVID-related lawsuits was constitutional.

“Plaintiffs and all other similarly situated students enrolled in an on-campus course of study in the University of North Carolina System, and prepaid tuition and various fees in exchange for Defendant’s promise to provide the unique benefits of an in-person, on- campus education experience, including face-to-face academic instruction and a host of other services, extracurricular activities and access to campus buildings and spaces,” wrote Blake Abbott, the students’ Charleston, South Carolina-based attorney, in a brief filed in February.

“But when Defendant cancelled in-person instruction and closed down campus in response to the COVID-19 crisis in March 2020, it refused to refund tuition, fees, room, and board paid as consideration for this on-campus experience, breaching its agreement with Plaintiffs and similarly situated students,” Abbott continued.

“Thus, the [lawsuit] alleges that students like Plaintiffs lost the benefits of the bargain for services and education for which they paid but could no longer access or use, in violation of their implied contact with Defendant,” Abbott argued. “Likewise, the [suit] alleges claims for breach of contract as it relates to on-campus housing and meals.”

A unanimous state Court of Appeals panel ruled against the Dieckhaus plaintiffs in January 2023. That decision upheld a trial court order against the students.

Student and parent plaintiffs from various UNC System schools seek partial refunds of tuition and fees paid in spring 2020. Every campus shut down in-person instruction during that semester, which coincided with the early days of the COVID-19 pandemic.

In June 2020, the General Assembly approved Senate Bill 208 by votes of 118-1 in the state House and 49-0 in the Senate. Gov. Roy Cooper signed the bill into law on July 1, 2020.

Now known as NC Gen. Stat. § 116-311, the law says “an institution of higher education shall have immunity from claims” related to “tuition or fees paid to the institution of higher education for the spring academic semester of 2020,” if the “claim alleges losses or damages arising from an act or omission by the institution of higher education during or in response to COVID-19, the COVID-19 emergency declaration, or the COVID-19 essential business executive order.”

In an order issued in December, the state Supreme Court agreed to address “whether N.C.G.S. § 116-311 violates the Contracts Clause of the United States Constitution; (2) … whether N.C.G.S. § 116-311 violates the Takings Clause of the United States Constitution; (3) … whether the legislature’s enactment of N.C.G.S. § 116-311 violated the due process clauses of both the United States and North Carolina Constitutions;  [and] (4) … whether defendants’ breach was ‘reasonably related to protecting the public health, safety, and welfare.’”

Justice Tamara Barringer recused herself from considering the Dieckhaus case.

North Carolina’s public universities moved from in-person to online classes on March 23, 2020, four days before Cooper issued a stay-at-home executive order tied to COVID-19. “Notably, while the universities transitioned to online instruction for the final weeks of the semester, students continued at all times to receive instruction, remain enrolled in school, and receive full course credit for the entire semester,” UNC lawyers wrote this spring when asking the state Supreme Court to reject the Dieckhaus csse.

Student and parent plaintiffs in Dieckhaus filed suit in May 2020 for partial refunds of tuition, fees, and other expenses linked to the weeks of exclusively online instruction. SB 208 followed the filing of the Dieckhaus suit.

“In enacting the statute, the General Assembly declared that: ‘[i]t is a matter of vital State
concern affecting the public health, safety, and welfare that institutions of higher education continue to be able to fulfill their educational missions during the COVID-19 pandemic without civil liability for any acts or omissions for which immunity is provided,’” UNC lawyers wrote. “Moreover, the Immunity Statute applies only where the university ‘offered remote learning options … that allowed students to complete the semester coursework.’”

Plaintiffs offered their initial argument to the state Supreme Court in April 2023.

“Plaintiffs’ education was changed from in-person, hands-on learning to online instruction midway through the Spring 2020 semester,” Abbott wrote. “When this happened, Plaintiffs were forced from campus and deprived of the benefit of the bargain for which they had paid, and in exchange for which Defendant had accepted, tuition as set forth more fully above.”

“In addition to tuition, Defendant charges certain mandatory student fees,” Abbott added. “Plaintiffs were required to and did pay the applicable fees at their respective constituent institutions for the Spring 2020 semester. However, as a result of being moved off campus, Plaintiffs and members of the Fees Class no longer have the benefit of the services for which these fees have been paid. For example, Plaintiffs were unable to participate in recreational and intramural programs; no longer had access to campus fitness centers or gymnasiums; no longer benefited from campus technology infrastructure or security measures; and no longer had the benefit of enjoying Spring intercollegiate competitions.”

“On top of the mandatory fees charged to all students, Defendant charges other access or program-based fees, such as fees for laboratory-based courses, parking permits, graduation fees for graduating seniors, etc.,” Abbott wrote. Three plaintiffs paid fees for on-campus housing and meal plans.

“N.C.G.S. § 116-311 seeks to protect Universities from all repercussions related to their Spring 2020 decisions to close campuses,” Abbott wrote.

“This Statute, as applied here is unconstitutional first because it violates the Contracts Clause,” the petition claimed. “Even if it is constitutional, a reading of the Statute demonstrates that Defendant has violated it by unreasonably withholding a refund. In whole, the Statute itself as applied, permits Plaintiffs to recover their funds from Defendant.”

In a separate case, Lannan v. Board of Governors of UNC, the state Supreme Court will decide whether students can proceed with a lawsuit seeking refunds related to shutdowns at UNC Chapel Hill and NC State University after the initial response to COVID-19. The Lannan case focuses on money families paid for the fall 2020 semester.

That case has no connection to the challenged law in the Dieckhaus dispute.

An October 2022 ruling from the state Court of Appeals would have allowed the Lannan lawsuit to move forward. The state Supreme Court issued an order weeks later blocking the Appeals Court’s decision. The high court agreed in March 2023 to take the case. Briefing in the Lannan dispute ended in June 2023, but the case has not yet been scheduled for oral arguments.