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Arizona Universities First to Beat Covid-19 Refund Claims (2)

July 30, 2020, 1:52 PMUpdated: July 31, 2020, 2:03 PM

The Arizona Board of Regents won dismissal of a proposed class action seeking the cost of room, board, and certain fees after public universities in the state went online for the Spring 2020 semester in the wake of the Covid-19 pandemic, after the District of Arizona found the plaintiffs failed to provide sufficient notice of the claims.

It appears to be the first dismissal of the hundreds of lawsuits filed against colleges and universities across the country by students and families seeking some form of refund for campus closures due to the coronavirus.

“This bellwether decision is a significant blow to the plaintiffs’ bar’s nationwide class action campaign against public universities, especially because it dismisses one of the actions alleging the largest class size,” attorney Molly E. Whitman with Akin Gump Strauss Hauer & Feld LLP told Bloomberg Law.

Several observers predicted that the suits would be difficult to win—particularly against public institutions that will claim sovereign immunity. But the court here never reached the sovereign immunity issue.

The decision says nothing about the merits, Professor Steven Schwinn at UIC John Marshall Law School in Chicago said.

“I’m not sure how predictive this ruling is of the outcome in other cases,” he said, “given its procedural posture, and procedural outcome.”

Attorney Barry Burgdorf, with Pillsbury Winthrop Shaw Pittman LLP, said many other states have pre-filing notice requirements when plaintiffs are pursuing the state for monetary damages, so plaintiffs in other states pursuing similar claims may face the same hurdle.

Burgdorf preciously served as Vice Chancellor and General Counsel of the University of Texas System.

The notice provision is intended to allow the state an opportunity to determine whether the sovereign immunity applies. But here, the court never reached the issue of sovereign immunity, he said.

Evaluating Options

Attorney Adam J. Levitt with Dicello Levitt Gutzler in Chicago, one of the attorneys representing the plaintiffs in the case, said the court got it wrong.

“The court, unfortunately, accepted ABOR’s arguments, putting form over substance and allowing ABOR and its constituent universities hide behind legal technicalities to avoid returning money that belongs to students,” Levitt told Bloomberg Law.

“It’s important to note, however, that the court has not rejected plaintiffs’ claims on the merits. We are evaluating several options and we look forward to continuing to pursue justice for the students. ABOR’s strategy of delay and avoid will not change the ultimate outcome,” he said.

Arizona law requires a plaintiff to file a notice of claim with a public entity before suing it for damages.

The U.S. District Court for the District of Arizona rejected the plaintiffs’ assertion that no notice was needed because they were seeking equitable relief, rather than money damages.

The complaint requested disgorgement of the prorated unused monies already paid, a declaration that the board is unlawfully withholding the funds, and an injunction enjoining the board from retaining them.

“However, an equitable remedy is inappropriate where, as here, an adequate legal remedy exists in the form of money damages,” the court said.

“Plaintiffs’ attempt to camouflage a legal remedy—i.e., money damages—by labeling it as an equitable one is revealed by the very form their claims take: breach of contract seeking ‘the benefit of their bargain’ and requesting a jury trial,” the court said.

If the plaintiffs had brought claims for damages, the state would be able to assert sovereign immunity.

The Arizona Attorney General’s Office concedes that the Public Entity Claims Act, which shields the state from claims for damages, doesn’t extend to claims for injunctive, equitable, or declaratory relief under state court precedent. But the AG argued that the case was really a suit for damages.

The plaintiffs are parents of students who were enrolled at one of three public universities in Arizona—the University of Arizona, Arizona State University, and Northern Arizona University.

State Actors

Under the Eleventh Amendment, absent consent by the state, public universities are state actors immune from suits seeking money damages brought by private plaintiffs in federal court, attorney Tracy M. Talbot with defense firm Bryan Cave Leighton Paisner LLP told Bloomberg Law.

Though plaintiffs may try to fashion their claims as equitable—seeking injunctive relief for example—rather than damages, to get around the immunity bar, the requests for disgorgement are really a request for money damages, attorney Chris Schmidt, also with Bryan Cave, said.

But whether public universities in other states can assert immunity is more like shades of gray than a simple binary yes or no question.

“You have 50 varieties of sovereign immunity,” Burgdorf said. “Some states like Texas have strong sovereign immunity, while others are much weaker.”

“When the state is acting in its governmental capacity sovereign immunity applies. But it may not when acting in a proprietary fashion,” he said.

“Universities can be both, so there can be a wide variety of results on sovereign immunity.”

Bryan Cave, which tracks the litigation, says 197 actions seeking coronavirus-related refunds from universities and colleges have been filed to date.

Judge John J. Tuchi issued the opinion.

DiCello Levitt Gutzler LLC, Matthew S. Miller LLC and Law Offices of Robert D Ryan PLLC represent the plaintiffs.

Lewis Roca Rothgerber Christie LLP represent the Arizona Board of Regents.

The case is Rosenkrantz v. Ariz. Bd. of Regents, 2020 BL 283657, D. Ariz., No. 20-cv-00613, 7/29/20.

(Updates 7/30 story with Akin Gump attorney Whitman’s comments in graf 4, Pillsbury Winthrop attorney Burgdorf’s comments in grafs 7 and 24-26.)

To contact the reporter on this story: Peter Hayes in Washington at PHayes@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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