UNC asks N.C. Supreme Court to block students’ COVID-related breach-of-contract suit

(CJ photo by Maya Reagan)

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  • The University of North Carolina is urging the N.C. Supreme Court to step in and block a lower court ruling linked to student fees collected during the COVID-19 pandemic.
  • A unanimous N.C. Court of Appeals ruling would allow UNC-Chapel Hill and N.C. State students to pursue breach-of-contract claims against their schools.

The University of North Carolina is asking the N.C. Supreme Court to block a lower court ruling that would allow students from UNC-Chapel Hill and N.C. State to pursue a breach-of-contract lawsuit against their schools. The suit is related to student fees paid during the COVID-19 pandemic.

A unanimous N.C. Court of Appeals panel ruled on Oct. 4 that students Joseph Lannan and Landry Kuehn could proceed with their suit.

Paperwork filed Wednesday asks the state’s highest court to grant a temporary stay against the Appeals Court order. UNC also urges the state Supreme Court to issue a “writ of superseadas.” The writ would block enforcement of the appellate judges’ order until appeals are resolved.

“The Court of Appeals held that Plaintiffs adequately pled an implied-in-fact contract based on the payment of fees and that by accepting those fees, Defendant entered into an implied-in-fact contract which waved its sovereign immunity,” wrote attorneys representing the university system. “This decision is not only inconsistent with North Carolina law and pleading standards, it also disregards the fundamental relationship between Defendant and its students, expands implied contract theory, and erodes the doctrine of sovereign immunity in a way that would invite a massive influx of litigation against the State and its agencies.”

Lannan and Kuehn argue their schools should have refunded fees paid for services that were unavailable during COVID-related shutdowns.

The university system claims sovereign immunity blocks the students’ legal action.

“[T]he trial court properly denied Defendant’s Motion to Dismiss the contract claims on sovereign immunity grounds because Plaintiffs adequately pled a valid implied-in-fact contract and such a contract can waive sovereign immunity,” wrote Chief Appeals Court Judge Donna Stroud on Oct. 4. “The trial court also properly denied the Motion as to the contract claims … because Plaintiffs’ Amended Complaint properly pleads breach of contract claim.”

NCSU graduate student Lannan and UNC-CH undergrad Kuehn argue their schools should have refunded student fees in 2020 after blocking access to services tied to those fees.

The lawsuit distinguishes UNC’s two flagship schools from the rest of the state university system.

“In the fall semester of 2020, despite the pandemic, 14 of the 16 constituent universities continued campus life, keeping campus facilities open,” according to a brief from Lannan and Kuehn’s attorneys. “However, two universities, North Carolina State University (NCSU) and the University of North Carolina at Chapel Hill (UNC-CH), shut down their campuses, evicted students (other than athletes) from campus, shuttered student unions and recreation facilities, canceled all arts performances, and banned access to sporting events. NCSU and UNC-CH had charged student fees for many of the activities they shut down.”

“Flouting the constitutional mandate that the people have access to the University free of expense ‘as far as practicable,’ Defendant Board of Governors refused to refund a penny of the millions of hard-earned dollars it collected from students for services it never provided,” the brief continued.

“Notably, this is not a case in which Plaintiffs complain about the quality of education they received, or even the quality of non-educational services,” according to the brief. “Rather, Plaintiffs contend that they paid for specific services and Defendant’s institutions outright failed to provide those services.”

Among Lannan’s fees at N.C. State were $439 for computer and science labs, $407 for the student health center, and $232 for campus sporting events. Kuehn’s UNC-CH fees included $442 for education technology on campus, $201 for student transit, and $159 for student union operations.

“As a result of NCSU’s and UNC-CH’s unnecessary campus closures, Plaintiffs were deprived of the use and benefit of all of the above facilities,” according to the students’ legal brief. “Further, because the campuses were essentially locked down, Plaintiffs got no benefit from either the campus bus system or from campus parking for which they had paid fees.”

“Despite depriving Plaintiffs and tens of thousands of other students of the services, benefits, and opportunities for which they paid, Defendant has refused to refund a penny of student fees.”

Lannan and Kuehn argue that their payment of fees to the schools created an “implied-in-fact contract.” Failure to provide services funded by fees amounted to a breach of that contract.

Stroud’s majority opinion noted the similarity of the students’ claims to breach-of-contract cases dealing with employees.

“In the employment cases, an employee agrees to work for the employer, and the employer agrees to pay the employee; based upon these facts, the terms of the implied contract are clear, even without an express written contract,” Stroud wrote. “In the educational context, as alleged by Plaintiffs’ Amended Complaint, the educational institutions agreed to accept and enroll the students, and the students have agreed to pay certain fees for particular services to be provided as part of the educational program. The parameters of the alleged implied contract are quite clear, and … ‘the State may, with a fair degree of accuracy, estimate the extent of its liability for a breach of contract.’”

The appellate ruling would return the case to a trial court, where a judge would decide whether Lannan and Kuehn win or lose their fight for refunds.

Since the Appeals Court panel’s decision was unanimous, the state’s highest court faces no obligation to take the case.