University Of Michigan Students Not Entitled To Prorated Refunds After COVID-19 Response

The Michigan Court of Appeals has upheld the dismissal of claims brought against the University of Michigan relating to the school’s retention of tuition, fees, and housing payments during the COVID-19 pandemic.

The case of Milanov, et al. v University of Michigan, et al. (Docket No. 361638) was one of numerous actions filed by college students regarding the educational changes that occurred in response to the COVID-19 pandemic. The plaintiff-students in Milanov sued the University of Michigan (U of M) and its Board of Regents after classes were moved online and other service modifications occurred because of the pandemic. The plaintiffs asserted that U of M’s actions “deprived them of the full educational experience and benefits that they paid for.” They sought a partial refund for the fees they paid and also brought claims for breach of contract or, alternatively, unjust enrichment.

The Michigan Court of Claims granted U of M’s motion for summary disposition, finding there was no genuine issue of material fact under MCR 2.116(C)(10). The plaintiffs appealed.

The Court of Appeals affirmed the dismissal.

“While U of M moved live, in-person courses to online learning and cancelled campus events, this was due to the unexpected COVID-19 pandemic,” the Court of Appeals wrote. “Even in the face of a devastating public health crisis, U of M ‘successfully maintained the core of its educational mission – providing instruction and various services for students – throughout the pandemic.’”

Judge Anica Letica, Judge Michelle M. Rick and Judge Mariam S. Bazzi were on the Court of Appeals panel that issued the unpublished opinion.

Student Lawsuits

The plaintiffs were students at U of M during the 2020 winter semester. When the COVID-19 pandemic struck in March 2020, the university moved all classes online via emergency remote learning. U of M also cancelled various campus events and prohibited gatherings in keeping with executive orders in effect at the time.

The plaintiffs filed this lawsuit against U of M in the Court of Claims, seeking prorated refunds for tuition, fees, and room and board. In their complaint, they did not take issue with the responses that were implemented for the health and safety of students, faculty and staff. Rather, the plaintiffs challenged U of M’s decision to retain all the tuition, fees, and room and board payments the plaintiffs had made “despite the change in classroom instruction, lack of campus services, and plaintiffs leaving student housing.”

The plaintiffs argued that U of M’s actions “deprived them of the full educational experience” and the “benefits that they paid for.” They argued there were implied contracts between themselves and the university for “live, in-person instruction” and that U of M breached these implied contracts by moving classes online without issuing prorated refunds. The plaintiffs also asserted that “emergency remote teaching was inferior to that of live, in-person instruction.”

Specifically regarding fees, the plaintiffs maintained there were implied contracts between themselves and the university “for services to be provided in exchange for fees paid during enrollment at U of M.” They argued that U of M breached these implied contracts “by retaining the fees without providing all contracted services.” As to housing, the plaintiffs asserted that U of M breached their housing contracts by retaining all payments “despite not providing housing for the entire semester.” In the alternative, they contended the university was unjustly enriched by retaining the plaintiffs’ payments for tuition, fees, and room and board.

U of M filed a motion to dismiss the allegations. The Court of Claims granted the university’s motion and dismissed the plaintiffs’ complaint.

The plaintiffs appealed.

No Implied Contract

On appeal, the plaintiffs first argued the Court of Claims wrongly held there was no evidence of implied contracts for exclusively live, in-person instruction or for certain types of campus services.

“We disagree,” the Court of Appeals said, noting the plaintiffs’ “sole argument” was that “implied-in-fact” contracts governed their claims.

An implied-in-fact contract “does not exist, unless the minds of the parties meet, by reason of words or conduct,” the Court of Appeals said. “Such contracts mandate ‘mutual assent just like any other contract, with the difference being that in the case of an implied-in-fact contract, the mutual assent is inferred from the parties’ words and actions since the parties did not directly express their mutual assent and intent to contract.’”

Addressing tuition, the Court of Appeals noted that although the 2020 winter semester course catalog indicated that classes were designated as being online or in-person, there was a disclaimer which provided that “[c]ourse offerings are subject to change. The final authority for changes in course offerings rests with the academic departments.” This language “demonstrates that U of M retained the right to change the mode of instruction. … Nothing about the course catalog or U of M’s historical conduct suggested an assent on the part of U of M to provide live, in-person instruction under any and all possible circumstances.”

Regarding fees, the plaintiffs pointed to a “Fee Schedule,” which provided that “’[a]ll persons, not specifically exempted, who are using University facilities and services must register and pay the appropriate fee,’” as evidence that fees were exchanged for services, the Court of Appeals explained. “However, plaintiffs ignore that the Office of the Registrar provided that ‘[b]y registering, you assume full responsibility for any fees incurred.’ This Court has already held such language to be dispositive.” In addition, the “Fee Schedule” provided that fees were “mandatory assessments” and “[a]ll students who enroll[ed] [would] be assessed the additional fees shown,” the Court of Appeals noted. “Such language showed that the fees at issue were mandatory and associated with enrollment, not with any exchange of services. … Furthermore, the evidence showed that the fees were paid regardless of whether plaintiffs utilized the associated services.”

Meanwhile, U of M presented evidence that fees were used during the 2020 winter semester “to support ongoing university operations, which remained available to students throughout the entire semester,” the Court of Appeals said. “U of M proved that it paid its staff regardless of the manner of instruction used. In other words, the fees were not premised on student usage. That refunds for fees were available up until a certain time period does not alter this conclusion because the mere possibility of a refund does not automatically lead to the conclusion that fees must have been exchanged for services. Fees could still be an incident of registration while also being refundable if students withdrew from the university by a certain period. In other words, if fees were part of enrolling at U of M, disenrolling by a certain period logically could lead to refunds.”

Moreover, “even assuming there was an implied contract, plaintiffs failed to show any breach because U of M produced unrebutted evidence showing that the fees were used to support the ongoing operations of the university throughout the Winter 2020 semester,” the Court of Appeals stated.

According to the Court of Appeals, there is a “general implied right” to receive education and services in exchange for tuition and fees. “Nevertheless, there is no legal authority supporting the contention that such an implied right extends to the precise manner of instructional delivery or type of service …. In light of U of M’s written indication that courses were subject to change and plaintiffs’ failure to point to any evidence to the contrary, there is no genuine issue of material fact that ‘there was no offer – and thus no meeting of the minds – on any specific format for delivering education and services,’ and therefore, no enforceable contractual promise on these matters.”

Housing Fees

Next, the plaintiffs argued that the Court of Claims erroneously held that U of M did not breach any terms of their housing contracts.

“We disagree,” the Court of Appeals said, pointing out the housing contracts “had clear provisions covering termination and refunds” and “expressly incorporated the Community Living at Michigan (CLAM) handbook, stating that residents of university housing ‘must comply with all rules, regulations and policies as applicable to your room. These rules, regulations and policies are in the Community Living at Michigan [CLAM] handbook and may change from time to time.’”

Contrary to the plaintiffs’ arguments, “nothing about this language suggests that only those portions of the CLAM addressing room activities were incorporated,” the Court of Appeals said. “Pursuant to the CLAM, students could terminate their housing contracts early, but were subject to a potential termination fee, which was 80% of the remaining contractual obligation. This fee was not automatic, but would be reviewed on a case-by-case basis, and, in many situations, it was automatically inapplicable. Refunds were available if U of M agreed to terminate the contract early, and students were required to submit a specific form for early termination. Without such approval, students were ‘responsible for all fees remaining on the full term of the contract, even if you check out.’ It is undisputed that plaintiffs never sought or received termination approval.”

Further, U of M did not force the plaintiffs to move out of student housing, the Court of Appeals observed. “The evidence showed that U of M encouraged its students to leave but explicitly allowed them to remain and for their needs, including food, housing, and health services, to be met. U of M provided a form for students remaining on campus to complete, and U of M also offered a $1,200 refund for those students who chose to move out. Both plaintiffs took the $1,200 refund in exchange for voluntarily moving out of campus housing. Plaintiffs and U of M expressly agreed to terms governing price, early termination, and refunds, and it is undisputed that plaintiffs never availed themselves of these terms. Instead, plaintiffs chose to voluntarily leave and take a $1,200 refund, but the terms of the contract they agreed to still made them responsible for the remainder of their housing costs. This Court must respect the parties’ intent and may not rewrite provisions at plaintiffs’ request.”

The Court of Appeals also rejected the plaintiffs’ claim that the housing contracts were “illusory,” saying this argument “lack[ed] merit” and noting that an illusory contract is “[a]n agreement in which one party gives as consideration a promise that is so insubstantial as to impose no obligation.” Here, U of M “could not unilaterally bar plaintiffs from their student housing because their contracts expressly gave plaintiffs the ability to occupy their rooms from August 30, 2019, to December 20, 2019, as well as from January 5, 2020, to May 1, 2020,” the Court of Appeals said. “If U of M prevented plaintiffs from occupying their rooms for reasons beyond those contained within the housing contract, U of M would be in breach of that agreement. Moreover, U of M was bound by the terms for early termination and refunds and could not unilaterally terminate the agreement for any reason whatsoever, which plaintiffs suggest.”

Therefore, the plaintiffs “failed to show any promise that U of M did not perform,” the Court of Appeals stated. “While plaintiffs seek a prorated refund for time spent away from student housing, they point to no contractual language that would grant them the relief they seek.”

Unjust Enrichment

Lastly, the plaintiffs asserted the Court of Claims erred by finding there was no evidence that U of M was unjustly enriched.

“We disagree,” the Court of Appeals said, noting that unjust enrichment occurs when a party “has and retains money or benefits which in justice and equity belong to another.”

In this case, “there was an express housing contract between each of the plaintiffs and U of M that covered early termination and refunds, thereby precluding application of this doctrine for plaintiffs’ room and board claim,” the Court of Appeals explained. “This leaves only plaintiffs’ claims regarding tuition and fees. There was no dispute that U of M charged the same tuition regardless of whether the class was in-person or online, which meant that U of M did not retain any additional benefit from moving its courses online. Moreover, the record indicates that U of M was able to continue to provide instruction and various services, such as housing and meals, despite the uncertainty of the global pandemic. There was no implied contract for classes to be delivered exclusively in a particular format or for services to be delivered in a particular manner, and the fees identified in this case went toward maintaining the campus and university regardless of whether students were utilizing particular services. In fact, U of M incurred significant costs as a result of its transition to online learning, and it paid its staff regardless of the manner of instruction used.”

The “unexpected” COVID-19 pandemic forced U of M to move live, in-person courses to online learning and cancel campus events, the Court of Appeals explained. “It was not unjust, under the circumstances, for U of M to retain the tuition and fees paid by plaintiffs. Ultimately, the Court of Claims did not err in granting summary disposition in defendants’ favor in this matter.”