Squeri v. Mount IDA Coll.

Decision Date25 March 2020
Docket NumberNo. 19-1624,19-1624
Citation954 F.3d 56
Parties Tristan SQUERI, individually and on behalf of all others similarly situated; Madeline McClain, individually and on behalf of all others similarly situated; George O'Dea, individually and on behalf of all others similarly situated, Plaintiffs, Appellants, v. MOUNT IDA COLLEGE; The Mount Ida College Board of Trustees; Carmin C. Reiss, individually and as a representative of Mount Ida College Board of Trustees; Barry Brown, individually and as a representative of Mount Ida College; Jeff Cutting, individually and as a representative of Mount Ida College; Ron Akie, individually and as a representative of Mount Ida College; Jason Potts, individually and as a representative of Mount Ida College, Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

Joshua N. Garick, with whom Law Offices of Joshua N. Garick, P.C., Andra Hutchins, and Kerstein, Coren & Lichtenstein LLP were on brief, for Tristan Squeri, Madeline McClain, and George O'Dea.

Alice W. Yao and Daniel A. Zibel on brief for the National Student Legal Defense Network, amicus curiae.

Katherine D. Shea and Pyle Rome Ehrenberg PC on brief for SEIU Local 509 and SEIU Local 888, amici curiae.

Thomas R. Murphy and Law Offices of Thomas R. Murphy, LLC on brief for the Hildreth Institute, amicus curiae.

Jeremy Sternberg, with whom Paul G. Lannon, Jr., John Monaghan, Christopher M. Iaquinto, and Holland & Knight LLP were on brief, for Mount Ida College, the Mount Ida College Board of Trustees, Carmin C. Reiss, Jeff Cutting, and Ron Akie.

Elizabeth E. Olien, with whom Howard M. Cooper and Todd & Weld LLP were on brief, for Barry Brown.

Tamsin R. Kaplan, with whom Emily P. Crowley and Davis, Malm & D'Agostine, P.C. were on brief, for Jason Potts.

Ben Robbins and Martin J. Newhouse on brief for the New England Legal Foundation, amicus curiae.

Before Lynch, Stahl, and Kayatta, Circuit Judges.

LYNCH, Circuit Judge.

In May 2018, Mount Ida College, a higher education institution with its principal place of business in Foxborough, Massachusetts, and its campus in Newton, Massachusetts, permanently closed after six weeks' notice to its students that it was closing. Mount Ida students in good academic standing were offered admission to UMass Dartmouth to continue their studies. Some students faced obstacles transferring their credits, finding comparable degree programs, completing their degrees on time, and receiving adequate scholarships and financial aid. By the time of the notice of closing, the transfer deadlines for many other institutions were imminent or had already passed.

Students Tristan Squeri and George O'Dea, and expected student Madeline McClain, brought a putative class action under Massachusetts law against Mount Ida, its Board of Trustees, and five Mount Ida administrators: President Barry Brown; Chairwoman of the Board of Trustees Carmin Reiss; Vice President, CFO, and Treasurer Jason Potts; Dean of Admissions and Vice President of Enrollment Management Jeff Cutting; and Chief Academic Officer and Provost Ron Akie.

Underlying all the claims were allegations that the defendants knew that Mount Ida was on the brink of insolvency but concealed this information, instead assuring current and prospective students that Mount Ida was financially stable. The suit brought seven Massachusetts state law claims: breach of fiduciary duty, violation of privacy, fraud, negligent misrepresentation, fraud in the inducement, breach of contract, and violation of Massachusetts General Laws ch. 93A. The district court granted the defendants' motion to dismiss the complaint. See Squeri v. Mount Ida Coll., No. 18-12438, 2019 WL 2249722, at *6 (D. Mass. May 24, 2019). We affirm.1

I.
A. Facts

We recite the facts as alleged in the plaintiffs' complaint, accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of the non-moving party. Penate v. Hanchett, 944 F.3d 358, 362 (1st Cir. 2019). On a motion to dismiss, we may also consider "documents incorporated by reference in [the complaint], matters of public record, and other matters susceptible to judicial notice." Lydon v. Local 103, Int'l. Bhd. of Elec. Workers , 770 F.3d 48, 53 (1st Cir. 2014) (alteration in original) (quoting Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008) ).

Mount Ida was established in 1899, enrolled in 2017 about 1300 students, and granted four-year bachelor's degrees as well as associate degrees and master's degrees. As early as 2014, Mount Ida was in "financial distress" and "teetering on insolvency." The defendants were aware of Mount Ida's financial position but did not give direct notice of this to current or prospective students.

Mount Ida filed annual audited financial statements with the Massachusetts Attorney General's Office (AGO), as it was required to do by Massachusetts law. See Mass. Gen. Laws ch. 12, § 8F. The financial statements filed with the AGO showed that Mount Ida operated at a deficit of $543,511 in 2014, $6,024,258 in 2015, and $1,488,272 in 2016.2 Under Massachusetts law, these filings must be publicly available. See id. § 8M ("[A]ll registration statements, annual reports and all other information required to be filed under [§§ 8 to 8M] ... shall be public records ... and shall be open to the general public for inspection at such time and under such conditions as the division may prescribe."). These returns are available online from the Massachusetts AGO. The audited return completed in 2017 for the year 2016 was so filed and available online. Federal law also requires nonprofits to file annual returns. See 26 U.S.C. § 6033. Such information must be available for public inspection. See id. § 6104(b); 26 C.F.R. § 301.6104(d)-1.

In August 2017, Mount Ida submitted an Institutional Self-Study to the New England Association of Schools and Colleges (NEASC), its regional accreditation agency which is recognized by the Department of Education under federal law. See 20 U.S.C. § 1099b. The Self-Study was not provided to students at Mount Ida, but to NEASC. The report evaluated Mount Ida on NEASC's nine standards for accreditation. In the Self-Study, the defendants reported to NEASC that Mount Ida had experienced "significant enrollment, program and aptitude growth," that pursuant to its multi-year financial strategy Mount Ida would generate an operating surplus in 2021, that Mount Ida was in full compliance with its debt obligations, and that it was "confident that it will raise sufficient funds to meet its liquidity needs."

The financial resources section of the document further stated that "[f]rom June 30, 2012 through June 30, 2016, operating revenues have increased from $35.8 million to $41.7 million while operating expenses have increased from $35.3 million to $43.2 million." The report forecasted that Mount Ida would continue to operate at a deficit until 2021, stating that "[b]ecause of many years of deferral of physical maintenance, low enrollment and failure of program expansion, the College's existing economic model does not anticipate a surplus from core operations until FY 2021."

On February 24, 2018, President Brown announced via email a possible merger between Mount Ida and Lasell College to the student body. The email stated that the purpose of the merger "would be to create a more robust learning experience that would take advantage of the distinctiveness of the programs, curricula and experiences of each institution." The email did not mention "that Mount Ida was in financial distress, that it was teetering on insolvency, or that it was seriously contemplating bankruptcy."

On March 23, 2018, President Brown emailed the Mount Ida student body announcing that Mount Ida and Lasell College had "ended discussions on the previously announced exploration of merger." The email further stated that "[o]ver the past six years, Mount Ida has undergone extraordinary growth," and specifically highlighted the increases in Mount Ida's enrollment, scholastic aptitude, and programmatic offerings. The email then stated that "[a]ll these gains have caused the national ratings of the institution to rise to among the top 30 in the North Region as reported in the US News and World Report Rankings." The email did not mention Mount Ida's financial distress.

On April 6, 2018, President Brown again emailed the Mount Ida student body and announced that "Mount Ida College has reached an agreement with the University of Massachusetts ... under which UMass Amherst will acquire our Newton campus." The email stated that "[w]hile this will mean that Mount Ida will end its role as an independent college, students in good academic standing will be offered automatic acceptance into UMass Dartmouth."

The announcement occurred without a closing plan having been submitted earlier to the Massachusetts Department of Higher Education (DHE). See 610 Mass. Code Regs. § 2.07(3)(f)(2) (requiring an institution that "knows that it may close" to submit a closing plan to DHE "as far as possible in advance of the closure" and to "arrange ... to safeguard the needs of students by organizing educational transfer opportunities, and ensuring the preservation of student records"). In the months leading up to the April 6, 2018, announcement, Mount Ida "had been accepting new students, offering substantial scholarships to new students, and outwardly proceeding as usual to the beginning of a new fall term."

In the days following the announcement of closing, students received individualized information packages about the process for enrolling at UMass Dartmouth. The personalized packages from UMass Dartmouth contained information about Mount Ida students' majors, estimated credits, transcripts, and financial aid packages. Mount Ida students had not given prior consent to the defendants to release these records to UMass Dartmouth.

On April 27, 2018,3 Mount Ida provided written notice of the sale to the AGO pursuant to Massachusetts General Laws ch. 180, § 8A(c), which...

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