UNC System claims ‘massive liability’ from suit over fees paid during COVID shutdown

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  • Lawyers for the University of North Carolina System argue that a recent N.C. Appeals Court decision exposes the university to "massive liability." The university urges the N.C. Supreme Court to consider an appeal.
  • The N.C. Association of Defense Attorneys has filed a brief supporting the university's position.

The University of North Carolina System argues that a recent N.C. Court of Appeals decision exposes the university to “massive liability.” The decision would allow students from N.C. State and UNC-Chapel Hill to sue over fees paid during COVID-19 campus shutdowns.

University officials filed paperwork Tuesday asking the N.C. Supreme Court to take up the case. The state’s highest court already issued an Oct. 21 order temporarily blocking the lawsuit from moving forward.

In a related note, a group representing N.C. defense attorneys filed a brief Tuesday supporting the UNC System’s case.

N.C. State grad student Joseph Lannan and UNC-CH undergrad Landry Kuehn seek refunds of fees paid in fall 2020, when their campuses were closed for most students. Lannan and Kuehn argue that their schools breached “implied-in-fact” contracts with students at the two flagship campuses.

“The Court of Appeals allowed the breach of contract claim to proceed, finding that by simply asserting the existence of an implied contract, Plaintiff had avoided the University’s sovereign immunity,” wrote lawyers representing the university’s Board of Governors. “The Court of Appeals also disregarded that the students knew when they paid the fees that they would not be refunded.”

“The panel decision exposes the University to massive liability in this case from claims by tens of thousands of students who seek repayment of fees of almost $1,000.00 each,” the UNC brief added. “And the decision opens up the University to future lawsuits from its students over any change to any aspect of student life, even if those changes were necessary in the interest of public safety.”

“Equally concerning is the fact that under the decision by the Court of Appeals, any person who pays a fee to any State agency will be able to plead breach of implied contract and proceed to discovery and possibly trial without any regard for sovereign immunity,” according to the brief.

The N.C. Association of Defense Attorneys raised its own concerns in a friend-of-the-court brief.

“[T]he Court of Appeals found that since the plaintiffs believe the fees entitled them to an on-campus experience, they had stated a claim for relief. If the state waives its immunity just [by] charging fees, then fee-supported government operations across the state will be curtailed or
even eliminated,” wrote attorney Steven Bader. “This is especially troubling if the plaintiff does not even need to show that the state charged the fee for a specific service.”

The defense attorneys’ group contends the case could have implications beyond state government. “Private businesses will also be impacted,” Bader wrote. “Following Lannan, fee payors in almost any setting can characterize a fee as a contract implied-in-fact, even if the business makes no promises about a customer’s experience and advertises ‘no refunds.’ Such allegations are ripe for class action lawsuits.”

Lannan and Kuehn filed paperwork on Oct. 27 urging the state Supreme Court to allow their lawsuit to move forward.

“In the fall semester of 2020, despite the pandemic, 14 of the 16 constituent universities continued campus life, keeping campus facilities open. 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,” the students’ attorneys argued. “NCSU and UNC-CH charged student fees for many of the activities they shut down.”

“This was not, as Defendant Board of Governors of the University of North Carolina … seeks to euphemize it, a mere change in the mode of instruction: it was a total shutdown of campus, complete with evicting non-athletic students from campus housing,” according to the students’ brief.

“Flouting the constitutional mandate that the people have access to the University of North Carolina free of expense ‘as far as practicable,’ the Board refused to refund a penny of the millions of hard-earned dollars it collected in student fees even though it never provided the services for which those fees were paid,” the students argued.

The state Supreme Court will decide whether to hear the university’s appeal. If not, the case will return to a trial court for further action.