UNC System offers latest arguments against refunds from COVID shutdown

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  • The University of North Carolina System has presented its latest arguments against a lawsuit seeking refunds for fees paid during COVID-related shutdowns at the system's two flagship campuses.
  • The N.C. Court of Appeals would have allowed the lawsuit from N.C. State and UNC Chapel Hill students to proceed. The students seek refunds of fees paid for the fall 2020 semester.
  • The N.C. Supreme Court will hear the case. University lawyers have warned that a win for the plaintiffs could lead to a "massive liability" for the UNC System.

The University of North Carolina System urged the N.C. Supreme Court again this week to dismiss a lawsuit from students at the system’s two flagship campuses. A lower court ruling would allow the students to pursue refunds for fees paid during COVID-related shutdowns.

“In an attempt to hold the University liable for collecting student fees, Plaintiffs invite the Court to depart from the fundamental principles of governmental authority, sovereign immunity, and contract law — a pathway that will yield errant outcomes in this and other cases,” wrote university lawyers in a brief filed Thursday.

“In response, the University asks only that the Court retain its fidelity to the State’s power to collect revenue to maintain its operations, this Court’s precedents restricting implied waivers of sovereign immunity, and the quintessential requirement that all contracts contain both an offer and mutual assent,” the brief added. “Because Plaintiffs’ arguments do not overcome these fundamental legal principles, this lawsuit must be dismissed.”

N.C. State grad student Joseph Lannan and UNC Chapel Hill undergrad Landry Kuehn challenged fees their schools charged in the fall 2020 semester, when the two campuses were closed for most students. It was the first full semester after the COVID-19 pandemic hit North Carolina.

An October 2022 ruling from the N.C. Court of Appeals would have allowed the 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 to take the case.

“When the University collects specific fees for specific services, the University enters an implied-in-fact contract with each of its students,” Lannan and Kuehn’s lawyers wrote in their latest brief earlier this month. “Further, when the State, or a State agency like the University, enters a contract, whether express or implied-in-fact, it agrees to be sued for breach of that contract and thereby waives sovereign immunity.”

“In the fall semester of 2020, the Covid-19 pandemic notwithstanding, 14 of the 16 constituent universities continued campus life, keeping campus facilities open,” the brief continued. “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, cancelled all arts performances, and banned access to sporting events. NCSU and UNC-CH charged student fees for many of the activities they shut down.”

Lannan and Kuehn seek refunds for themselves “and other similarly situated.”

The University of North Carolina System could face a “massive liability” of “tens of millions of dollars” if the two students win their suit, university lawyers argued in May.

“This case is about fees that the University is required by statute to collect from students and whether the payment of those fees could form a contract with students,” according to the latest brief from the team of government and private lawyers representing the university. “The Court of Appeals found that Plaintiffs had pled an implied contract related to those fees made up of some unspecified terms and that the University waived its sovereign immunity by entering into that contract.”

“In reaching its decision, the Court of Appeals erred by (i) disregarding the nature of the student fees as statutory requirements, (ii) glossing over bedrock principles of contract law, and (iii) invading the province of the Legislature by expanding waiver of sovereign immunity,” according to UNC’s brief.

“In Fall 2020, the University relied on North Carolina law when it developed a plan for addressing the still-evolving impact of COVID-19 on its students,” the brief added. “The University was transparent, telling its students before they paid the statutorily required fees that the fees would not be refunded even if the manner of instruction changed at any point in the semester.”

UNC warned about the potential negative impact of the Appeals Court’s decision.

“The panel decision strips the University – and potentially any other state agency – of any opportunity to rely on settled legal principles to identify, assess, and mitigate its potential legal exposure. If any statement across a state or local agency’s massive network of information could constitute an implied-in-fact contract, it would be impractical, if not impossible, for the agency to identify what information could be cherry-picked and cobbled together to support an implied-in-fact contract claim.”

“In addition, here the decision potentially exposes the University to massive liability – including a money judgment possibly reaching tens of millions of dollars to Plaintiffs and their lawyers – based on an amorphous contract that the University never entered,” UNC warned. “The decision also potentially 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 – i.e., changes at East Carolina University or UNC-Wilmington in the event of a devastating hurricane.”

The university warned that the case undermined the “fundamental goal of sovereign immunity.”

“Given the potentially unchecked scope of implied-in-fact contract theory claims across government information platforms, if affirmed, the panel decision could subject governmental agencies to an unnecessary and costly burden of litigation (discovery, motions, and trial), borne by the public, even where the agencies ultimately prevail at trial. The purpose of sovereign immunity is to avoid that very result,” UNC lawyers wrote.

The state Supreme Court has not yet scheduled oral arguments in Lannan v. Board of Governors.