In the early stages of the coronavirus-related close-down, most colleges and universities terminated live classes, switched to online lessons, and sent their students home. In some cases, affected students have filed lawsuits against their schools, seeking to recover tuition and fees paid for classes, housing, and food. The following posts discuss the extent of the exposure that these kinds of claims represent for these institutions’ boards of directors or boards of trustees.


In early to mid-March, as the coronavirus outbreak began to gain momentum in the U.S., a number of leading universities discontinued on-campus classes and sent students home. Many schools shifted to on online classes, using Zoom or other virtual platforms. In response to these moves, a number of students filed lawsuits against their schools, seeking to recover the amounts they paid for tuition, room, and board.


As detailed in an April 20, 2020 post on the Class Action Countermeasures blog (here), a number of these student lawsuits have been filed as class action lawsuits. Among the schools that have been hit with these student class action lawsuits include Drexel University (here), Purdue University (here), Liberty University (here), and the University of Miami (here). These lawsuits seek recoveries for tuition and fees paid on various theories of breach of contract, unjust enrichment, and conversion.


The lawsuit against Purdue is particularly interesting, because it is brought on behalf of four classes: the class of persons who paid tuition and who were deprived of live classes; the class of persons paid for on-campus housing but who had to move out before the semester ended: the class of persons who had paid for on-campus meals for the entire semester; and all students who had paid fees for the semester.


Each of these four actions names as the sole defendant the university or school itself. None of the lawsuits names any individuals as defendants. As an interesting contrast, a separate lawsuit filed on March 27, 2020 on behalf of students at three Arizona Universities – the University of Arizona, Arizona State University, and Northern Arizona University – is filed not against each of the three universities, but rather against the Arizona Board of Regents, the statutorily created body responsible for operating Arizona’s state universities. Although the named defendant – the Board of Regents — sounds like a board of individuals, the complaint itself alleges that the Board of Regents is a “corporate body.”


A more recently filed lawsuit involving Columbia University arguably sounds even more like a D&O claim. On April 23, 2020, a student at Columbia University filed a pseudonymous lawsuit in the Southern District of New York against The Board of Trustees of Columbia University in the City of New York. A lawsuit against a board of trustees does seem to suggest that the suit is targeting the individuals on the institution’s board. However, the complaint itself alleges that the Board of Trustees of Columbia University “is an institution of higher learning located in New York City, New York.” In other words, while seemingly filed against the members or the organization’s board, the complaint itself purports to file claims against the institution.


These lawsuits have only just been filed and whether and to what extent they will be successful remains to be seen. As the Class Action Countermeasures blog points out, the outcome of these suits will depend to a large extent to the actual provisions of the contracts to which the students agreed, as well as the specifics and timing of the actions the different schools’ have taken, including the extent of any refunds or credits allowed.


Even with the lawsuits against the Arizona Board of Regents and the Board of Trustees of Columbia University, none of the lawsuits filed to date of which I am aware names as defendants the individual members of institutions’ boards of directors or boards of trustees. Whether and to what extent individual board members will be expressly named as defendants in these kinds of student class action lawsuits remains to be seen.


The possibility of these kinds of claims is obviously only one of many things about which board members must be concerned these days. Among other things, universities and their boards are wrestling with tough issues about whether or not their schools will be able to re-open for live classes this fall. Whether or not the school is going to re-open is a concern for all of a school’s students, but arguably will be of particular concern for student who otherwise would be entering the school as freshmen in the fall semester.


The pandemic-related disruption has had an enormous impact on the educational institutions’ finances. Many schools will lose massive amounts of revenue as a result of the campus closures and the costs of refunds or credits. Some schools have implemented layoffs and hiring freezes. For some schools, these moves may not be sufficient. It is entirely possible that the combination of circumstances could cause a number of institutions to fail. To be sure, Congress has taken actions to try to provide the higher education sector with some relief, but there are concerns that the relief may be too little and too late.


In other words, the boards of institutions face a host of serious challenges, all of which may include at least the potential for director or trustee liability actions. As the student class action lawsuits filed so far show, actions of institutions in response to the coronavirus can result in litigation. As educational institutions struggle to deal with this ongoing and evolving crisis, the possibility that forthcoming actions could result in further litigation cannot be disregarded.


The coronavirus outbreak has a number of sections of the U.S. economy under enormous stress. Among the economic sectors under stress is the higher education sector. In response to these concerns, insurers providing management liability insurance for the higher education sector are newly wary and have become exceedingly cautious. In a way in which they were not in the past, underwriters in this sector are particularly focused on financial issues, particularly as relates to cash flow, liquidity, and debt. Along with a number of other sectors, the higher education sector is one of the numerous economic sectors that has as a result of the coronavirus outbreak is now in the elevated risk category.