Appeals court allows students’ COVID breach suits vs. IU, Purdue to proceed

Lawsuits filed by students at Indiana and Purdue universities alleging breaches of contract when the schools moved to online learning because of the COVID-19 pandemic will proceed, the Court of Appeals of Indiana has ruled.

In March 2020, Indiana Gov. Eric Holcomb issued a series of executive orders declaring a public health disaster emergency, imposing social distancing and stay-at-home requirements and allowing educational institutions to continue operations—but only for purposes of facilitating distance learning.

IU and Purdue moved all in-person classes online for the rest of the spring semester, which ended in May, closed campus facilities and urged students to return to their homes.

Students at the universities filed class-action complaints, one against IU and two against Purdue, alleging the schools breached contractual promises for in-person instruction, services, activities, housing and meals. They requested prorated refunds of tuition, student fees and room and board fees as damages. The complaints also alleged the universities were unjustly enriched by retaining those funds.

IU filed a motion for judgment on the pleadings, which was denied in full, and Purdue filed motions to dismiss for failure to state a claim, which were largely denied.

In a consolidated appeal, the universities argued the trial courts erred in denying the motions.

Finding no error, the appeals court affirmed on Thursday in The Trustees of Indiana University v. Justin Spiegel; The Trustees of Purdue University v. Elijah Seslar, Zachary Church, Jordan Klebenow, and Luke McNally, 21A-CT-175.

First, the court determined the plaintiffs’ complaints sufficiently stated claims for breach of implied contract and unjust enrichment regarding tuition and student fees.

Regarding the implied contracts, the plaintiffs argued that the universities and students bargained for in-person instruction, services and activities in exchange for tuition and student fees, and that the schools breached this agreement by transitioning to online instruction and closing campus facilities, thus depriving them “of the benefit of the bargain for which they had already paid.”

While the universities contended the governor’s executive orders made it legally impossible for them to fulfill in-person instruction, the court opined that the “viability of this affirmative defense is premature at this stage of the proceedings.”

“If indeed the executive orders discharged the universities’ duty to perform their obligations under the contract, then ‘claims for unjust enrichment may lie,’” Judge Terry Crone wrote for the appellate court.

The court also determined the plaintiffs in the Purdue case sufficiently stated claims for breach of express contract regarding room and board fees.

Purdue argued that the plaintiffs’ allegations were undermined by their own admissions elsewhere in their complaint, that “some university housing would remain open for students who needed to remain on campus” and that “food options on campus would be continued.”

“There is no indication that the Church plaintiffs were among those students with ‘extenuating circumstances,’ and it is up to the trier of fact to determine whether offering ‘very limited’ dining options was a breach of the parties’ contracts,” Crone wrote.

Finally, the court declined to address the enforceability of Indiana Code § 34-12-5-7 for the first time on appeal.

In April 2021, after the trial courts issued their rulings and after the universities filed a motion with the court for consideration of their interlocutory appeals, Holcomb signed Public Law 166-2021, which was made retroactive to March 1, 2021.

Section 13 of the law provides that “[a] claimant may not bring, and a court may not certify, a class action lawsuit against a covered entity [i.e., the universities] for loss or damages arising from COVID-19 in a contract, implied contract, quasi-contract, or unjust enrichment claim.”

Despite requests by the universities and amicus to consider the enforceability of the statute as a court of first instance, the court declined.

“Here, the issues presented by the trial court’s orders are whether the Plaintiffs’ complaints sufficiently state claims for breach of contract and unjust enrichment, not whether Public Law 166-2021 precludes the Plaintiffs from litigating their claims on a class basis,” Crone wrote. “This issue was raised before the trial court in a similar case involving Ball State University, which is represented by the universities’ counsel; after a hearing, the court ruled in Ball State’s favor on February 11, 2022, and that ruling is currently being appealed.

“… The universities in this case may raise the statutory issue in due course before their respective trial courts, just as their counsel did in the Ball State case,” Crone concluded.