Lannan v. Bd. of Governors of the Univ. of N.C.

• Decision Date: 04 October 2022
• Docket Number: COA21-554
• Parties: Joseph LANNAN, and Landry Kuehn, on behalf of themselves and others similarly situated, Plaintiffs, v. BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, known and distinguished by the name of "The University of North Carolina," a body politic and corporate, Defendant.
• Court: North Carolina Court of Appeals

879 S.E.2d 290

Joseph LANNAN, and Landry Kuehn, on behalf of themselves and others similarly situated, Plaintiffs,

v.BOARD OF GOVERNORS OF the UNIVERSITY OF NORTH CAROLINA, known and distinguished by the name of "The University of North Carolina," a body politic and corporate, Defendant.

No. COA21-554

Court of Appeals of North Carolina.

Filed October 4, 2022

White & Stradley, PLLC, Raleigh, by J. David Stradley and Robert P. Holmes, IV, and Law Office of Brian D. Westrom, by Brian D. Westrom, Durham, for plaintiffs-appellees/cross-appellants.

Attorney General Joshua H. Stein, by Special Deputy Attorneys General Laura McHenry and Kari R. Johnson, and Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, Greensboro, by Jim W. Phillips, Jr. and Jennifer K. Van Zant, for defendant-appellant/cross-appellee.

STROUD, Chief Judge.

¶ 1 Defendant Board of Governors of the University of North Carolina appeals from an order denying its Motion to Dismiss Plaintiffs Joseph Lannan and Landry Kuehn's breach of contract claims. Plaintiffs cross appeal from the same order's grant of Defendant's Motion to Dismiss their state constitutional claim under Corum v. University of North Carolina Through Bd. of Governors , 330 N.C. 761, 413 S.E.2d 276 (1992). We first confirm our appellate jurisdiction and grant Defendant's Petition for Writ of Certiorari as to the issue of whether the trial court erred in denying its Motion to Dismiss the contract claims for failure to state a claim under North Carolina Rule of Civil Procedure 12(b)(6). N.C. Gen. Stat. § 1A-1, Rule 12(b)(6) (2021). As to Defendant's appeal, because Plaintiffs’ Amended Complaint pled a valid implied-in-fact contract and such a contract can waive the State and its agencies’ sovereign immunity, the trial court properly denied Defendant's Motion to Dismiss the contract claims on sovereign immunity grounds. Because Plaintiffs adequately pled breach of contract claims, the trial court also acted correctly in denying Defendant's Motion on Rule 12(b)(6) grounds. Turning to Plaintiffs’ cross appeal, because their contract claims are adequate state remedies, the trial court properly granted the Motion to Dismiss their Corum claim. Therefore, we affirm.

I. Background

¶ 2 Since this case is at the pleading stage, we rely upon the facts as alleged in Plaintiffs’ Amended Complaint.¹ Defendant is the Board of Governors for the University of North Carolina at Chapel Hill ("UNC-CH") and North Carolina State University at Raleigh ("NCSU"), two constituent institutions of the University of North Carolina ("Universities"). Before the Fall 2020 Term, Defendant required students planning to attend the Universities to pay certain student fees. These students included Plaintiff Kuehn, an undergraduate student at UNC-CH, and Plaintiff Lannan, a graduate student at NCSU. The Universities required students to pay these fees to register as a student, "remain ... in good standing," receive "scholastic credit," and "obtain a transcript" for the Fall 2020 term.

¶ 3 The student fees were also "earmarked for specific categories of services and benefits" that Fall 2020 students at the Universities "[were] entitled to receive" from the Universities. The Universities "represented in writing on their respective websites and in written communications to each student" through emails to students, account statements, and an itemized bill, "each component Student Fee would be used for the purposes described ... for that component fee." For example, both Universities had fees related to student health services. UNC-CH described its student health services fee as: "Student Health Fee - $400.16: ‘Funds medical services for students, including the salaries, maintenance and operation of student health centers.’ " Similarly, NCSU described its student health services fee as: "Student Health Services Fee – This fee of $407.00 is used by the University Health Center to offer medical and counseling services to students." The other student fees for the Fall 2020 term included: academic registration, education technology, library services, scholarships, teaching awards, student IDs, different schools within the universities, campus security, campus programming, student organizations, student publications, student government, student legal services, the student centers, sustainability, recreational sports, intercollegiate athletics, transit, night parking, and debt servicing for and expansion of certain on-campus buildings. Plaintiffs and the other students at the Universities paid these fees with the understanding they would be used for the listed services and benefits.

¶ 4 In addition to the student fees, Plaintiffs and some other students purchased from the Universities "optional motor vehicle parking permits which permitted the purchasers to park their motor vehicle on NCSU's and UNC-CH's convenient on-campus parking lots for the Fall 2020 Terms." For Plaintiff Lannan, this fee covered only the Fall 2020 Term, but for Plaintiff Kuehn, the parking permit included both the Fall 2020 and Spring 2021 Terms.

¶ 5 In August 2020, both NCSU and UNC-CH took measures to switch from in-person to online learning and shut down their campuses for the Fall 2020 Term. The original Complaint indicated this shut down was due to the COVID-19 pandemic, but the Amended Complaint includes no explanation for the shutdown. As a result of the shutdown, the constituent Universities: "evicted all students from on-campus housing"; cancelled "all in-person, on-campus instruction"; restricted "campus transportation service to the point that service was of extremely limited value"; barred students from accessing "on-campus student athletic[,] recreation facilities," and student activity venues; "shut down on-campus libraries ... workshops, laboratories[,] studios, ... museums[,] arboretums," the student unions, and dining halls; "stopped live art performances on campus"; prohibited students from attending intercollegiate sports; "discontinued student organization activity and other in-person student activity"; and "curtailed student health services and advised Fall 2020 Term students that they should obtain health services" elsewhere.

¶ 6 Based on these alleged facts, Plaintiffs eventually filed an Amended Complaint on 3 February 2021. The Amended Complaint includes claims for breach of contract, "or, in the alternative, if it is determined that Plaintiffs cannot assert a claim for breach of contract, a ‘Corum claim’ " against Defendant for its constituent Universities UNC-CH and NCSU's decisions to "improper[ly]" assess and retain student fees and on-campus parking permit fees "after on-campus classes, activities, and student services at the" Universities "were stopped or curtailed in and after August 2020." The Amended Complaint states the suit is a class action "on behalf of students who registered and paid student fees for the Fall 2020 academic semester" at the constituent Universities of the University of North Carolina, with a separate class for those who paid for on-campus parking. As a result, the Amended Complaint includes "Class Action Allegations," (capitalization altered) but the class action component of the lawsuit is not at issue in this appeal.

¶ 7 Focusing on the relevant portions of the lawsuit, the breach of contract claims cover both student fees and parking permit fees. As to the student fees contract claim, the Amended Complaint alleges the Universities "offered to Plaintiffs and other prospective Fall 2020 Term ... students that if the prospective students registered for the Fall 2020 Terms and promised to pay" student fees they "would, in turn, receive the services, benefits, and opportunities" described in the student fees. Plaintiffs and the other students then "accepted the offers" when they paid their student fees and thus "expected to receive, and were entitled to receive ... all of the services, benefits, and opportunities" described. According to the Amended Complaint, this constituted "a meeting of the minds," thereby creating a contract.

¶ 8 While Plaintiffs and the other students in the class "fully performed their duties" by paying the student fees, the Universities breached the contract when they shut down their campuses, as detailed above, because they either stopped providing the services or "rendered" them "of no value whatsoever." The Amended Complaint alleges "[b]ut for the unnecessary decisions" to shut down the campuses, Plaintiffs and the other students in the proposed class "would have regularly gone on their respective campuses" and thus taken advantage of the services and benefits provided for by the student fees, as they and others had done in the past. Finally, the Amended Complaint alleges Plaintiffs and the other students suffered damages because they did not receive "the services, benefits, and opportunities" they paid for with the student fees and the fees "were not adjusted, pro-rated, or rebated in any way" following the campus shutdowns.

¶ 9 As to the parking fees contract claim, the Universities "offered to sell optional parking permits" to Plaintiffs and other students "which would permit the purchaser to park a motor vehicle in an on-campus parking lot during the Fall 2020" Term. Plaintiffs and some other students "accepted the offers" by buying the parking passes, thereby forming a contract. The Amended Complaint alleges all relevant students performed by paying their parking fees fully and expected and were entitled to receive "the full benefit of their parking permits for the duration of the Fall 2020 Term." But the Universities breached the contract by shutting down their campuses, which meant the on-campus parking passes were "rendered worthless." While Plaintiffs and other students received partial refunds, the refunds did not cover the full cost of the parking passes and thus the full damages suffered.²

¶ 10 For both contract claims, the Amended Complaint also alleges Defendant waived...