Top NC court to decide if UNC System students can seek COVID-related refunds

Justice Richard Dietz, center, asks a question during oral arguments at the North Carolina Supreme Court. (Image from the Supreme Court of North Carolina YouTube page)

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  • The North Carolina Supreme Court heard two cases Tuesday dealing with University of North Carolina System students' attempts to recover refunds related to campus shutdowns during the COVID-19 pandemic.
  • One case challenges a July 2020 state law protecting the UNC System from legal action related to campus closings during the spring 2020 semester.
  • The other case focuses on fees students at North Carolina State University and UNC Chapel Hill paid in fall 2020, when the two flagship campuses remained closed for most students.

The North Carolina Supreme Court tackled a pair of cases Tuesday that could determine whether University of North Carolina System students can seek refunds related to COVID campus shutdowns.

Those two cases were part of a series of eight COVID-related disputes the state’s top court is considering over two days.

In Lannan v. Board of Governors of UNC, a graduate student from North Carolina State University and a UNC Chapel Hill undergrad seek refunds for fees paid to the flagship campuses for the fall 2020 semester.

At that time, all other UNC System schools had reopened for in-person instruction after initial campus shutdowns related to COVID-19. NCSU and UNC-CH remained closed to most students while classes proceeded online. The lawsuit seeks recovery of fees paid for on-campus services unavailable to students in the fall 2020 semester.

The North Carolina Court of Appeals ruled that the case should be allowed to move forward.

“The university warned students ‘tuition and fees will not be refunded,’” when preparing for the fall 2020 semester, argued lawyer Troy Shelton, representing the UNC System. “That statement was in the cover email sending students their billing statements for fees, and it was in bold and italics.”

Troy Shelton at the North Carolina Supreme Court
Attorney Troy Shelton argues at the North Carolina Supreme Court. (Image from the Supreme Court of North Carolina YouTube page)

Shelton objected to the plaintiffs’ arguments that the students had an implied-in-fact contract to provide services that were unavailable in fall 2020.

“If we’re going to treat those kinds of relationships as implied-in-fact contracts with who knows what terms, then we’re really inviting chaos,” he said.

Shelton also asserted the university’s sovereign immunity against the students’ lawsuit, admitting the potential for a “harsh result.” “The problem is: Sovereign immunity always has a bitter taste to it,” he said.

Arguing for the plaintiffs, lawyer David Stradley rejected the university’s defense of its actions.

“When one takes money in exchange for something, that person must provide what was paid for,” Stradley argued. “It matters not whether that person happens to be the State of North Carolina. A deal is a deal. On that point, law and common sense agree.”

David Stradley at the North Carolina Supreme Court
Attorney David Stradley argues at the North Carolina Supreme Court. (Image from the Supreme Court of North Carolina YouTube page)

Justice Richard Dietz compared the university fee payments to other contractual obligations, including payments for lawn-mowing and haircuts offered in a barbershop.

“If the state puts out a lemonade stand and it says ‘Lemonade: $1’ … and people come up and they hand a dollar and they’re still standing there and the person says, ‘Well, goodbye, have a nice day,’ and keeps the dollar, it would seem to me that’s exactly the sort of contract that we would  say waives sovereign immunity,” Dietz said.

Justice Trey Allen asked Stradley whether the court should consider the potential financial impact of ruling in favor of his clients.

“How concerned should we be that if we do say that this is an implied-in-fact contract as alleged and that it waives sovereign immunity that we could be exposing the state to massive and unexpected financial liability, which ultimately rests on the taxpayers?” Allen asked.

“The size of the contract ought not change the law,” Stradley responded.

The second case, Dieckhaus v. Board of Governors of UNC, addressed campus shutdowns across the UNC System during the earliest days of the COVID-19 pandemic. Students and parents from across the state seek partial refunds for money paid for the spring 2020 semester.

The Dieckhaus plaintiffs challenge a law the General Assembly passed in July 2020 to protect the university from legal action. Lower courts have ruled in favor of the university.

“Our argument is that there is a contract that for payment of these fees and tuition the university system is going to provide these services,” argued lawyer Eric Poulin. “They did not provide those services. Therefore, the contract was breached.”

Eric Poulin at the North Carolina Supreme Court
Attorney Eric Poulin argues at the North Carolina Supreme Court. (Image from the Supreme Court of North Carolina YouTube page)

“At that point we now have a cause of action … a vested claim to recover for that breach or to try to get our money back for the services that were not provided that we prepaid for, and the statute comes in and wipes out that remedy under the contract that existed,” Poulin added.

“This court and the US Supreme Court have repeatedly held that the state can withdraw its consent to be sued at any time,” lawyer Craig Schauer argued for the UNC System.

Craig Schauer at the North Carolina Supreme Court
Attorney Craig Schauer argues at the North Carolina Supreme Court. (Image from the Supreme Court of North Carolina YouTube page)

Justice Anita Earls questioned the extent of the General Assembly’s ability to limit lawsuits against the state.

“I’m just trying to understand how it’s possible to have a meaningful right that you can’t enforce,” she said. “Where is the limit on your principle that the sovereign can withdraw their consent to be sued at any time? Doesn’t that effectively mean that there are no enforceable contracts against the state of North Carolina?”

“I think your point is: What’s the value of a contract if you can’t enforce a remedy against the state?” Schauer responded. “There’s a potential harshness to the reality of sovereign immunity in this context.”

“Society has made a decision that we’re not going to allow those rights to result in a remedy because there are greater concerns at play,” he added. “I think that’s what you see in sovereign immunity.”

Schauer added that the General Assembly has relied on sovereign immunity “judiciously” during the state’s history.

Justice Tamara Barringer took part in neither argument. She will not help decide either the Lannan or the Dieckhaus case.  

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