Zhao v. CIEE Inc.

• Decision Date: 28 June 2021
• Docket Number: No. 20-1878,20-1878
• Citation: 3 F.4th 1
• Parties: Annie ZHAO, individually and on behalf of all others similarly situated, Plaintiff, Appellant, v. CIEE INC.; Council on International Education Exchange, Inc., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

3 F.4th 1

Annie ZHAO, individually and on behalf of all others similarly situated, Plaintiff, Appellant,

v.CIEE INC.; Council on International Education Exchange, Inc., Defendants, Appellees.

No. 20-1878

United States Court of Appeals, First Circuit.

June 28, 2021

Sigmund D. Schutz, with whom Gregory P. Hansel, Randall B. Weill, Alexandra A. Harriman, Preti, Flaherty, Beliveau & Pachios, LLP, Joshua Fields and Kirtland & Packard LLP were on brief, for appellant.

Chad W. Higgins, with whom Robert J. Keach, Patrick I. Marass, Zack B. Brandwein and Bernstein, Shur, Sawyer and Nelson, P.A., were on brief, for appellees.

Before Howard, Chief Judge, Thompson, Circuit Judge and Arias-Marxuach,^* District Judge.

Arias, District Judge.

Appellant Annie Zhao was studying abroad in the Netherlands in March 2020 when the COVID-19 pandemic upended daily life. In response to the pandemic, Appellees CIEE, Inc. and the Council on International Educational Exchange, Inc. (collectively, "CIEE"), Zhao's study abroad provider, cancelled the abroad portion of her program and made alternative arrangements for her to complete her coursework online. On appeal, Zhao does not question the wisdom of cancelling this portion of her study abroad program. Nor does she question the alternative arrangements made by CIEE to allow her to complete her course work online. Instead, she questions the district court's decision to dismiss, for failure to state a claim, her complaint against CIEE for breach of contract because the company refused to provide a refund in lieu of experiences, excursions, activities, and services she would have otherwise enjoyed abroad absent the pandemic.¹ The district court construed the contract to give effect to all its provisions and concluded no refund was due when the cancellation of a program occurs after it started. We affirm.

Background

Zhao, a member of the Harvard College Class of 2021, paid CIEE for a Spring 2020 study abroad program at the University of Amsterdam in the Netherlands. Prior to the program's start in late January 2020, Zhao and other similarly situated participants signed the CIEE Program Participant Contract and Forum Methodology for Dispute Resolution Agreement ("Participant Contract"), which included the CIEE Terms and Conditions ("Terms and Conditions"). On March 11, 2020, the World Health Organization declared COVID-19 a pandemic and the United States Centers for Disease Control issued a Level 3 travel warning for Europe and Level 2 global travel advisory, and the United States Department of State issued a Level 3 global travel advisory. On March 12, 2020, CIEE notified the program participants of its plans to suspend the abroad portion of their study abroad programs and on March 15, 2020, it acted accordingly. To ensure that participants could still earn academic credit, CIEE migrated its on-site programs to online and distance-learning classes. Zhao completed her program coursework online. Although initially equivocating about whether Zhao would receive any refund, CIEE ultimately did not provide her with one and instituted a no-refund policy for most students on April 1, 2020.

On June 11, 2020, on her behalf and of those similarly situated, Zhao sued CIEE in Maine Superior Court alleging that in cancelling their program, CIEE breached its contractual duty to them. Zhao claimed they had a right to a refund for services not provided by CIEE because Paragraph 14 of the Participant Contract states that "[i]n the unlikely event that a program is cancelled (due to low enrollment or any other reason), CIEE will refund all payments received but will have no further liability to participant." On July 6, 2020, CIEE removed the case to federal district court and filed a Motion to Dismiss, arguing that other clauses in the Participant Contract and Terms and Conditions exempted them from issuing refunds to participants.

On August 31, 2020, the district court granted the motion. It agreed with CIEE that other provisions of the Participant Contract and Terms and Conditions limited CIEE's contractual obligations to the participants, including Zhao, and dismissed the complaint. See Zhao v. CIEE, Inc., No. 2:20-cv-00240-LEW, 2020 WL 5171438, at *4 (D. Me. 2020).

Standard of Review

We review de novo a district court's order granting a motion to dismiss under Fed. R. Civ. P. 12(b)(6). See Newton Covenant Church v. Great Am. Ins. Co., 956 F.3d 32, 34 (1st Cir. 2020) ; see also Riggs v. Curran, 863 F.3d 6, 10 (1st Cir. 2017) ("In conducting this review, we accept the truth of all well-pleaded facts and draw all reasonable inferences therefrom in the pleader's favor.") (quotation omitted). As part of this review, we consider the complaint's well-pleaded allegations and "documents sufficiently referred to" therein. Giragosian v. Bettencourt, 614 F.3d 25, 28 (1st Cir. 2010) (quotation omitted). However, we "reject unsupported conclusions or interpretations of law." Dixon v. Shamrock Fin. Corp., 522 F.3d 76, 79 (1st Cir. 2008) (internal quotation marks omitted).

The Participant Contract Absolves CIEE of Zhao's Refund Claim

Under Maine law, the elements of a breach of contract claim are: "(1) breach of a material contract term; (2) causation; and (3) damages."²

Wetmore v. MacDonald, Page, Schatz, Fletcher & Co., LLC, 476 F.3d 1, 3 (1st Cir. 2007) (quotation and emphasis omitted). "When interpreting a contract, a court needs to look at the whole instrument." Me. Woods Pellet Co., LLC v. W. World Ins. Co., 401 F. Supp. 3d 194, 200 (D. Me. 2019), reconsideration denied, 2020 WL 3404728 (D. Me. 2020) (quoting Am. Prot. Ins. Co. v. Acadia Ins. Co., 814 A.2d 989, 993 (Me. 2003) (alteration omitted)). The whole instrument here refers to the Participant Contract as well as to the included Terms and Conditions, both of which Zhao signed. See Crowe v. Bolduc, 334 F.3d 124, 137 (1st Cir. 2003) (quoting Hilltop Cmty. Sports Ctr., Inc. v. Hoffman, 755 A.2d 1058, 1062 (Me. 2000) ).³

Further, courts will "interpret a contract according to the plain meaning of its language, and will avoid any interpretation that renders a provision meaningless." Me. Woods Pellet Co., LLC, 401 F. Supp. 3d at 200 (quoting Richardson v. Winthrop Sch. Dep't, 983 A.2d 400, 403 (Me. 2009) ). The interpretation of contractual language "is a matter of law for the court to decide." Fowler v. Boise Cascade Corp., 948 F.2d 49, 54 (1st Cir. 1991) (citing Portland Valve, Inc. v. Rockwood Sys. Corp., 460 A.2d 1383, 1387 (Me. 1983) ). If the language is unambiguous, then, under Maine law, the judge can interpret the contract as a matter of law to see if a breach occurred. See Am. Prot. Ins. Co., 814 A.2d at 993 (quoting Acadia Ins. Co. v. Buck Constr. Co., 756 A.2d 515, 517 (Me. 2000) ). Whereas if the court finds the contractual language to be ambiguous, then "its interpretation is a question of fact for the factfinder." Id.

Recall that Paragraph 14 of the Participant Contract states that "[i]n the unlikely event that a program is cancelled (due to low enrollment or any other reason), CIEE will refund all payments received but will have no further liability to participant." While Paragraph 14 explains when a refund may be issued due to program cancellation, the Terms and Conditions also contain a section addressing program cancellation. The first paragraph of the "Program Cancellation" section of the Terms and Conditions provides for refunds in the event a program is canceled prior to its start:

CIEE reserves the right to cancel a CIEE Study Abroad program due to insufficient enrollment or other factors beyond its control. ... In the unlikely event that a program is canceled prior to the start of the program, due to low enrollment or any other reason, CIEE will refund all payments received but will have no further liability to participant.

(Emphasis added.)

The second paragraph of that same section sets out CIEE's obligations when an emergency requires cancellation of a program after its start and prior to the end of an academic term:

If an emergency requires that a program be canceled following the program start date and prior to the end of an academic term, CIEE will make reasonable efforts to make alternative arrangements in order to allow students to complete their academic work, but cannot guarantee that full or partial credit will be obtained. If alternative arrangements cannot be made, CIEE will make reasonable efforts to collect documentation of student work completed to date. CIEE will share this information with the home institutions of students enrolled in the program so they will be able to evaluate, per home institution policies, whether to grant their students any, full, or partial credit for work completed.

(Emphasis added.)

Lastly, the Terms and Conditions provide that "in the case of conflict among ... [CIEE's] policies," the Participant Contract, "inclusive of these Terms & Conditions, first applies. It is the sole responsibility of the student to become familiar with all CIEE and host institution policies."

Zhao bases her breach of contract claim on the fact that CIEE failed to fulfill its obligation to offer a study abroad experience to participants and, instead, migrated its programs into an online platform of lesser quality and without the true abroad experience including activities and excursions. She claims that under Paragraph 14 she and similarly situated students have an unambiguous right to receive compensation, in the form of a refund, for the difference in value between the services CIEE agreed to deliver and those she and the other students received after the program moved online.⁴

CIEE contends the district court correctly applied basic rules of contract interpretation to find the Participant Contract unambiguous. Hence, it properly looked to the Participant Contract's whole context and structure rather than reading Paragraph 14 in isolation. CIEE also claims that by signing the Participant Contract, inclusive of the Program Cancellation ...