A federal appeals panel has granted students a new chance to sue Illinois Institute of Technology on allegations it improperly denied refunds they sought related to a loss of on-campus learning opportunities during the early days of the Covid pandemic.
The U.S. Seventh Circuit Court of Appeals ruling, issued March 27, echoes a 2-1 July 2022 opinion from the same court that overturned a similar lawsuit from Loyola University students.
Seventh Circuit Judge Candace Jackson-Akiwumi wrote the majority opinion in the Loyola case, with concurrence from Judge Ilana D. Rovner. Circuit Judge Amy J. St. Eve dissented in that case.
Seventh Circuit Judge Diane Wood wrote the opinion on the appeal from IIT students. St. Eve concurred in that opinion, as did Judge Thomas Kirsch.
IIT student Oscar Hernandez filed the class action complaint against his school, alleging a breach of the contract “to provide in-person instruction, services, and resources, in exchange for the student’s payment of tuition and compulsory fees,” Wood wrote. The lawsuit further accused IIT of unjust enrichment by keeping tuition and fees without delivering the promised services.
Although U.S. District Judge Franklin Valderrama dismissed the complaint, the appeals panel said it found “no meaningful distinctions between his case and Gociman v. Loyola University of Chicago,” and likewise agreed Hernandez’s allegations were sufficient to proceed to the next stage of litigation.
In arguing for dismissal, IIT said its marketing materials that referenced in-person, on-campus teaching didn’t establish an express or implied identifiable, enforceable promise and that its own tuition refund policy negates Hernandez’s lawsuit. Although Judge Valderrama granted IIT’s motion to dismiss all counts for failure to state a claim, he rejected the school’s position that Hernandez was functionally alleging educational malpractice, which is not actionable under Illinois law.
Wood explained the Seventh Circuit decided Gociman while Hernandez’s appeal was pending. That opinion found both that the “students adequately stated claims for breach of an implied contract under Illinois law, and that their claims were not educational malpractice complaints in disguise.”
It did not, however, agree there was an express contract between Loyola and its students.
In reviewing the IIT lawsuit, the panel reached the same conclusion.
Although Hernandez failed to show “a formal document signed by both the university and the student, with the word ‘Contract’ at the top of the page,” Wood wrote, other students have successfully argued the existence of an implied contract from a university based on customs, regulations, course catalogs and marketing materials.
In addition to conventional college promotional documents, the panel noted Hernandez referenced IIT’s catalog and class registration portal, both of which distinguish between “traditional” and “online” teaching and “specifically prohibit traditional students from registering for online classes, absent approval.” He also argued certain mandatory student fees apply only to on-campus activities, like sports, the library and career and technology services.
“Hernandez has sufficiently alleged facts that plausibly suggest the existence of an implied contract for in-person education and access to physical facilities and resources,” Wood wrote. “He alleged that IIT has a long-established practice of providing in-person instruction and on-campus resources, and that IIT has consistently indicated that the service it is selling is one that involves an in-person, on-campus experience. These representations appear in its website, course catalogue, and other official materials provided to current and prospective students. We conclude, just as we did in Gociman, that this suffices for the present to support Hernandez’s claim that an identifiable contractual promise to provide an in-person, on-campus university experience in exchange for tuition and fees can be inferred from ‘the facts and conduct’ of IIT.”
IIT argued the Loyola students alleged it cost more to enroll in on-campus programs. Wood explained that although Hernandez did not allege the same is true of IIT, the remainder of his complaint alleged IIT treated its programs distinctly.
In her Gociman dissent, St. Eve wrote the majority’s decision defies precedent on the question of colleges’ legal contractual obligations to students and warned the ruling would expand Illinois law to extend so-called “‘fundamental promise’ implied contracts” in post-secondary education “beyond the realm of matriculation and graduation” to now include the way in which instruction is delivered.
“Our analysis should not be read to imply that in-person instruction and physical campus access are implied terms of every student-university contract,” Wood wrote. “Even before the pandemic, schools had different practices for online programs. Afterwards, some may have rebated certain fees that were limited to on-campus activities; and virtually all have revamped their policies and programs going forward.”
The panel also rejected IIT’s invocation of its tuition refund policy. Wood said further proceedings may allow IIT to prove it “exercised the discretion it purports to have in accordance with the parties’ reasonable expectations” but the panel would not allow “a generic disclaimer” to justify dismissing the complaint outright.
Regarding unjust enrichment, the panel said the Loyola students couldn’t press that claim because they merely restated their contractual allegations but are required to make new arguments. By contrast, Hernandez pleaded unjust enrichment “in the alternative to, and to the extent it is determined a contract does not exist or otherwise apply,” Wood wrote.
Hernandez can continue with his claim, Wood wrote, because he alleged IIT got “significant aid from the federal government” and “save significant sums of money” by operating a remote campus, which falls outside the scope of his contractual claims.
The panel reversed Judge Valderrama’s decision and remanded the complaint for further proceedings.
Hernandez has been represented in the case by attorneys Roy T. Willey IV and Eric M. Poulin, of Poulin Willey Anastopoulo, of Charleston, South Carolina; and Daniel J. Kurowski and Steven W. Berman, of Hagens Berman Sobol Shapiro, of Chicago and Seattle.
IIT has been represented by attorneys William T. “Toby” Eveland, Nancy DePodesta, Hal R. Morris, Elizabeth A. Thompson and Andrew E. Bollinger, of the firm of Saul Ewing Arnstein & Lehr, of Chicago.