How the CARES Act Will Help Universities Combat the New Rise of COVID-19 Class Actions

Universities continue to see a rise of COVID-19-related class action lawsuits alleging that campus closures deny students the full benefits of an on-campus college experience. This new wave of class action lawsuits generally seek full refunds for tuition, room and boarding costs, and other matriculation fees based on a breach of contract theory and claims of unjust enrichment. Many colleges and universities have already taken proactive measures that will help defend against these lawsuits. Some institutions implemented policies to refund student monies or apply room and boarding fees for the impacted term of enrollment toward future enrollment periods. For universities that have not taken these measures, the Coronavirus Aid, Relief, and Economic Security (CARES) Act may provide a potential, unintended defense to a class action.

The CARES Act was enacted at the close of March 2020. It provides direct cash-aid relief to undergraduate students. This relief can be used to offset economic injury students may be suffering due to COVID-19 in a variety of ways. In some cases, the varied use (or non-use) of CARES Act relief can help a university defeat allegations that students have all suffered a common injury based on a common set of facts. Proof of this commonality is required to certify a case as a class action.

Under Part IV of the CARES Act, higher educational institutions have broad flexibility under the CARES Act to disburse supplemental educational opportunity grant aid to students who may not otherwise qualify (because, for example, family contributions to education would disqualify them from need-based grants). It allocates more than $13 billion to higher educational institutions, more than $6 billion of which must be issued as “emergency aid” to students to cover food, housing, course materials, technology, health care, and childcare. The CARES Act also allows institutions to make federal work study (FWS) payments to students on FWS programs through the end of the academic year, even if the student is unable to work due to campus closures. Given the varied forms of potential economic relief afforded by the CARES Act, plaintiffs’ attorneys may struggle to establish a common financial injury to the allegedly affected class of students on college and university campuses.

Of course, class action lawsuits may face difficulty proving common harm was suffered by putative class members regardless of whether CARES Act relief is provided to students. Courts may find an education is an education, regardless of the delivery method (in person or remotely) and therefore hold it is proper to charge full tuition during this time. Additionally, some universities did not charge students room and boarding costs, while others issued refunds on student tuition bills. For those students that received cost waivers or refunds, there was arguably no harm.

Unlike public universities, private schools may not have a sovereign immunity defense to this new outcrop of lawsuits. But the CARES Act can mitigate if not eliminate some of the financial damages claimed by students in this new wave of higher education class actions. It provides a welcome, potential defense to private and public colleges alike.

We will continue to keep you informed as these class action lawsuits evolve.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Critical information for employers is also available via the firm’s webinar programs.