MSU Not Obligated To Refund Tuition And Fees For Its COVID-19 Response

The trial court properly dismissed the plaintiffs’ contractual claims against Michigan State University over the school’s response to the COVID-19 pandemic in the spring of 2020, the Michigan Court of Appeals has ruled. 

The three plaintiffs in Allen, et al. v Michigan State University, et al. (Docket Nos. 358135, 358136 and 358137) sued Michigan State University (MSU) in the Michigan Court of Claims, asserting they had “paid for” and “anticipated” the “in-person delivery of education and the availability of services” but alleged the university’s “online alternatives provided” in the spring of 2020 when the COVID-19 pandemic hit “were inherently inferior and did not constitute the product for which they had contracted.” As a result, the plaintiffs maintained that MSU owed them partial refunds.  

The trial court dismissed the plaintiffs’ claims, finding there was no genuine issue of material fact that the fees collected by MSU continued to support services or programs offered or sponsored by the organizations that received the fees. The trial court further held there was no evidence to support a finding that it was inequitable for MSU to retain the fees for the remainder of the 2020 semester. The plaintiffs appealed. 

The Court of Appeals affirmed, noting the “paramount issue” in the case pertained to “the existence of an express or implied contract that confers upon the plaintiffs the right to seek recovery from MSU.”  

The plaintiffs asserted “a right to recover under theories of express, implied-in-fact, and implied-in-law contracts,” the Court of Appeals said. However, MSU contended the contracts alleged “were never made because MSU never promised to provide only in-person instruction and services, even amid a global pandemic, and MSU never promised to issue refunds if in-person learning and activities were interrupted by a pandemic.” 

The Court of Appeals agreed with MSU, finding “no evidence supporting the contractual terms plaintiffs claim were breached” and that “MSU rightly received summary disposition regarding the plaintiffs’ … contract claims for tuition and fees.” 

Judge Stephen L. Borrello wrote the published opinion, joined by Judge Noah P. Hood and Judge Adrienne N. Young. 

Background 

The case arises from MSU’s response to the COVID-19 pandemic in spring 2020. The plaintiffs – James Allen, Matthew Olin and Megan Placko – were students at MSU at that time.  

On March 10, 2020, Gov. Gretchen Whitmer declared a statewide emergency after the first two presumptive-positive cases of COVID-19 in Michigan were identified. On March 11, 2020, then-MSU President Samuel L. Stanley Jr., M.D., informed the MSU community the school was “suspending face-to-face instruction in lectures, seminars and classroom settings and moving coursework to virtual instruction” until April 20, 2020, subject to “ongoing re-evaluation as more information became available.” 

On March 16, 2020, MSU’s Vice President for Auxiliary Enterprises sent a letter to on-campus residents stating that, although students were encouraged to return to their permanent residences if possible, they could remain in on-campus housing if leaving campus was impossible or if the campus was a student’s permanent home. The letter also stated that MSU was offering a $1,120 credit to students who checked out of on-campus housing by April 12, 2020.

A short time later, the plaintiffs filed their lawsuits against MSU. All three complaints were similar in that the plaintiffs sought partial refunds of tuition and fees, asserting claims for breach of contract, breach of implied contract, unjust enrichment, conversion and “money had and received.” Thereafter, MSU filed various motions for summary disposition, arguing the plaintiffs’ claims should be dismissed.

The trial court issued a written opinion and order dismissing the plaintiffs’ claims. First, the trial court ruled there was no genuine issue of material fact that the fees collected continued to support services or programs offered or sponsored by the organizations that received the fees as funding. Second, the trial court held there was no evidence to support a finding that it was inequitable for MSU to retain the fees for the rest of the 2020 semester.  

The plaintiffs appealed.

Arguments On Appeal

On appeal, the plaintiffs asserted “a right to recover under theories of express, implied-in-fact, and implied-in-law contracts,” the Court of Appeals explained. “They contend that they paid for and anticipated in-person delivery of education and the availability of services. Plaintiffs argue that the online alternatives provided were inherently inferior and did not constitute the product for which they had contracted. Consequently, they claim entitlement to a partial refund based on the disparity between the anticipated and actual value delivered by MSU.”  

The plaintiffs further argued their contract with MSU, “which promised in-person education and services,” was “evidenced by the course catalog, brochures, advertisements, promotional materials, and the online student portal,” the Court of Appeals said. “In an alternate argument, plaintiffs maintain that an implied-in-fact contract existed based on the conduct of the parties, MSU’s historical practice of providing in-person education on campus, and the aforementioned written materials that led both them and MSU to reasonably believe that they were engaging in an exchange of tuition payments for in-person, on-campus instruction and access afforded by the university.”

In addition, the plaintiffs claimed that MSU was “unjustly enriched by retaining the entirety of the tuition and fees paid by the plaintiffs without fulfilling the expected semester of in-person education and services,” the Court of Appeals said. “Instead, they argued, MSU offered only inferior emergency online courses and canceled on-campus activities and events.”

Meanwhile, MSU claimed the contracts alleged by the plaintiffs were never made because the school “never promised to provide only in-person instruction and services, even amid a global pandemic, and MSU never promised to issue refunds if in-person learning and activities were interrupted by a pandemic,” the Court of Appeals said. “MSU argues that not only did plaintiffs fail to provide any evidence that the alleged contract existed, but plaintiffs also failed to allege any facts supporting a claim that such a contract was made.” 

MSU also maintained that Cuddihy v Wayne State University Board of Governors, 163 Mich App 153 (1987), “rejected the notion that student handbooks or other similar informational materials may create implied contracts between a student and university” and asserted that “its decisions regarding how to deliver education and services, including under the circumstances of an unexpected global pandemic, remain within the exclusive purview of the university as an academic institution,” the Court of Appeals explained. “Therefore, students do not have any implied contractual rights to expect any specific form of instructional delivery or student services. MSU argues that it expressly retained its discretion to modify programs and policies in a reservation of rights clause contained in the academic catalog, even if that catalog was construed as a contract.” 

Regarding the plaintiffs’ unjust enrichment claims, “MSU maintains that it could not have been unjustly enriched by transitioning to online instruction because per-credit-hour tuition is the same for in-person and online courses,” the Court of Appeals wrote. “Additionally, MSU argues that it was not unjustly enriched by retaining the fees collected because the organizations funded by those fees continued to operate, and there was no evidence that the plaintiffs’ fees secured any particular or specific event, activity, or service terminated during the pandemic.”

No Contract, No Unjust Enrichment 

The Court of Appeals began its analysis by examining whether an express or implied contract existed between the plaintiffs and MSU. 

“Here, plaintiffs have not cited any record evidence demonstrating that MSU affirmatively promised and committed itself to providing only in-person instruction under all circumstances for the entire semester in exchange for tuition,” the Court of Appeals wrote. “Plaintiffs also have not cited any evidence in the record demonstrating that MSU affirmed its promise and commitment to providing any particular type of service on campus in exchange for fees. Plaintiffs have not shown any evidence that MSU expressly manifested, in writing or orally, an intent to provide only in-person instruction or particular types of services on campus for the entire semester under all circumstances. … There is no evidence that MSU ever offered to make such promises to plaintiffs, or any students. … Accordingly, there is no evidence of mutual assent. … The record evidence shows that MSU reserved its right to make these changes. … Accordingly, no evidence supports the conclusion that an express contract existed for a particular form of instruction or services in exchange for tuition and fees, as claimed by plaintiffs.” 

However, “whether there were implied-in-fact contracts for in-person instruction and on-campus access to facilities and student services presents a somewhat closer question,” the Court of Appeals observed.

The plaintiffs argued that, although MSU retained the right to modify programs and policies, “no reasonable person would expect significant changes to impact something as fundamental as the shift from in-person instruction and services to an online format,” the Court of Appeals said. “To address this matter definitively, we must examine the relevant legal principles that clearly outline the rights and responsibilities between students and higher education institutions, especially given the unique nature of their relationship. A university’s relationship with its students is crucial in these situations, as it determines what can be reasonably inferred when assessing the existence of an implied-in-fact contract. … Furthermore, MSU argues explicitly on appeal that ‘Plaintiffs’ implied contract theory failed under Cuddihy … which broadly rejected the proposition that student handbooks and the like may provide a basis such an implied or quasi-contract claim by a student against a university.’ As an initial matter, we do not understand this Court’s decision in Cuddihy to stand for such a broad proposition.”

The plaintiffs contended there was an implied-in-fact contract between students and MSU, “which stated that MSU would provide in-person educational instruction and on-campus student services in exchange for tuition and fees,” the Court of Appeals said. “Plaintiffs contend that this implied-in-fact contract was based on the conduct of the parties and ‘MSU’s long-standing custom of in-person, face-to-face education on campus,’ along with the MSU course catalog, brochures, the online student portal, promotional materials, and advertisements. In these cases, there was record evidence that MSU expressly designated certain courses in its class schedule as ‘online’ or ‘hybrid’ (combining online with in-person instruction) and that traditional in-person classes included a designated meeting time and location for the class. The record also contains evidence of various MSU promotional materials explaining the types of facilities and experiences that students could expect to have access to both in and out of the classroom. Furthermore, there was evidence that course instructors were expected to meet with their classes at the designated scheduled times.”

The plaintiffs’ argument, however, “ignores that MSU’s catalog included a broad reservation of rights to amend these offerings,” the Court of Appeals wrote. “Therefore, even if we assume an implied-in-fact contract agreeing to exchange tuition for educational instruction and fees for various student activities, the reservation of rights language indicates there was no offer – and thus no meeting of the minds – on any specific format for delivering education and services. … This conclusion decisively resolves this issue on appeal, as there is no evidence supporting the contractual terms plaintiffs claim were breached. MSU rightly received summary disposition regarding the plaintiffs’ implied-in-fact contract claims for tuition and fees.”

Regarding the plaintiffs’ unjust enrichment claims, the plaintiffs “must establish that the defendant received a benefit from the plaintiff[s] and that it would be inequitable for the defendant to keep the benefit,” the Court of Appeals said. “Evidence presented to the trial court shows that MSU charged equal tuition for both in-person and online courses, and the funded organizations continued their operations and services for students. It is undeniable that courses were initially offered as in-person classes and that on-campus events were canceled due to an unexpected global crisis, the pandemic. Despite the pandemic, MSU successfully maintained the core of its educational mission – providing instruction and various services for students – throughout the pandemic. Furthermore, there was never an agreement stipulating that education and services had to be delivered in a specific format. Therefore, it is wholly fair and just for MSU to retain the tuition and fees it collected. … MSU was entitled to summary disposition on these unjust enrichment claims.”

Other Claims 

Next, the Court of Appeals addressed plaintiff-Allen’s argument that the trial court wrongly dismissed his breach of contract claim for room and board. In doing so, the appeals court pointed out the record included a copy of the written student housing and dining services contract, as well as the “On-Campus Housing Handbook” that was expressly incorporated in the written contract.

“The housing and dining contract stated that it was ‘binding’ on the student for ‘the entire academic year,’” the Court of Appeals noted. “Here, the record indicates that MSU encouraged students living on campus to return to their permanent residences if possible. MSU also informed students that they could remain in on-campus housing if MSU was the student’s permanent residence or if leaving was not possible. MSU also offered a $1,120 credit to students who chose to move out of on-campus housing. Allen admitted that he moved out of on-campus housing in March 2020 and appeared to concede that he received the $1,120 credit. MSU stated below that this credit was consistent with what a student could obtain under the buyout provision of the contract, and the defendant does not dispute this contention.”

Plaintiff-Allen “has not identified any promise that MSU made in the contract that it did not perform,” the Court of Appeals stated. “Although Allen asserts that he is entitled to a full prorated refund for the remainder of the semester during which he did not live on campus, instead of the partial refund he received, no contractual language gives Allen an enforceable right to what he claims. Thus, there is no question of material fact that there was no breach of the contract. … MSU was entitled to summary disposition on this breach-of-contract claim. MSU was also entitled to summary disposition on the unjust enrichment claim related to room and board because ‘[c]ourts may not imply a contract under an unjust-enrichment theory if there is an express agreement covering the same subject matter.’”

Meanwhile, plaintiff-Olin and plaintiff-Placko asserted the trial court erroneously granted summary disposition on their conversion claims. “In this case, neither the Olins nor the Plackos asserted that MSU was obligated to deliver a specific money or check; rather, both alleged that MSU had wrongfully retained payments,” the Court of Appeals wrote. “This is insufficient to state a claim for conversion. The trial court did not err by granting MSU summary disposition on the conversion claims.” 

As for plaintiff-Olin’s argument that the trial court should not have summarily dismissed the claim for “money had and received” for tuition and fees, the Court of Appeals said this type of action is an “action of assumpsit.” Assumpsit “has been abolished as a cause of action, and assumpsit claims are simply a subset of unjust enrichment claims,” the appeals court pointed out. “The … claim for money had and received is merely duplicative of their tuition-and-fee-based unjust enrichment claim. Summary disposition of this claim was thus also proper for the same reasons.”

Based on the foregoing analysis, the Court of Appeals affirmed the trial court’s decision.