Implied Contract in Higher Education: Seventh Circuit's Analysis in Gociman v. Loyola University

Introduction

The case of Andreea Gociman, et al. v. Loyola University of Chicago, adjudicated by the United States Court of Appeals for the Seventh Circuit in July 2022, addresses critical issues surrounding contractual obligations in higher education during unprecedented circumstances. The plaintiffs, undergraduate students, initiated a class-action lawsuit against Loyola University, alleging breach of contract and unjust enrichment following the university's transition to remote instruction amid the COVID-19 pandemic. This commentary delves into the intricacies of the judgment, exploring the court's reasoning, cited precedents, and the potential implications for future cases in the domain of educational contracts.

Summary of the Judgment

The plaintiffs, students enrolled in Loyola University's on-campus program during the Spring 2020 semester, contended that the university breached its contractual obligations by shifting to remote instruction due to the COVID-19 pandemic. They sought refunds for tuition and fees corresponding to the portion of the semester conducted online. The district court dismissed the case, invoking the educational malpractice doctrine and questioning the specificity of the contractual promises. However, upon appeal, the Seventh Circuit found merit in the students' claims of an implied contract for in-person education and remanded the case for further proceedings, particularly allowing the plaintiffs to amend their unjust enrichment claim.

Analysis

Precedents Cited

The court referenced several key precedents to frame its analysis:

Bell Atlantic Corp. v. Twombly: Established the "plausibility" standard for motions to dismiss.
Waugh v. Morgan Stanley & Co.: Clarified that educational malpractice claims are not recognized in Illinois.
Ross v. Creighton Univ.: Acknowledged the contractual nature of student-university relationships.

These precedents collectively underscore the necessity for specific contractual promises and the general rejection of educational malpractice as a viable claim. The court leveraged these decisions to assess whether the plaintiffs sufficiently alleged a breach of an implied contract.

Legal Reasoning

The Seventh Circuit engaged in a meticulous examination of the elements required to establish a breach of contract under Illinois law, which include the existence of a valid contract, substantial performance by the plaintiff, breach by the defendant, and resulting damages. The court focused on the concept of an implied-in-fact contract, deriving its terms from the conduct and published materials of Loyola University.

Key factors supporting the implied contract claim included:

Loyola's course catalogs and registration portal explicitly stated that many courses would occur in-person.
Higher tuition and fees for on-campus programs compared to online offerings suggested additional services and facilities access.
Pre-pandemic practices of providing in-person instruction reinforced the students' reasonable expectations.

The court dismissed Loyola's contention that these references amounted to unenforceable predictions rather than concrete promises. By applying the Twombly and Iqbal standards, the court determined that the plaintiffs' allegations were sufficient to survive dismissal, warranting further examination of the contractual obligations.

Impact

This judgment potentially sets a significant precedent for how implied contracts in higher education are interpreted, especially in the context of disruptions like a pandemic. Universities may need to reassess their contractual communications and the specificity of the promises made to students regarding the mode of instruction and access to facilities.

Additionally, the decision provides a pathway for students to seek redress in similar situations, emphasizing that higher education institutions hold contractual responsibilities that extend beyond mere financial transactions. The remanding of the case allows for a nuanced exploration of unjust enrichment claims, which, if successful upon amendment, could further compel universities to refund fees when they fail to deliver promised services.

Complex Concepts Simplified

Implied-in-Fact Contract

An implied-in-fact contract is not written or explicitly stated but is inferred from the conduct of the parties involved. In this case, behavioral indicators like course catalogs indicating in-person classes and the structured fee differences between on-campus and online programs suggest a mutual understanding or agreement to a certain mode of instruction.

Educational Malpractice Doctrine

The educational malpractice doctrine refers to legal claims that challenge the quality or methods of education provided by an institution. However, Illinois law does not recognize educational malpractice as a valid cause of action, thereby preventing students from suing based solely on dissatisfaction with the quality of education.

Unjust Enrichment

Unjust enrichment occurs when one party benefits at the expense of another in a manner deemed unjust by law. In this context, if Loyola University retained tuition fees without providing the agreed-upon services, the students could claim that the university was unjustly enriched.

Conclusion

The Seventh Circuit's decision in Gociman v. Loyola University of Chicago underscores the critical role of implied contracts in higher education. By recognizing that universities may have concealed contractual obligations inferred from their promotional materials and operational practices, the court has opened avenues for students to hold institutions accountable beyond express agreements. This judgment not only clarifies the boundaries of contract law within educational settings but also serves as a cautionary tale for universities to transparently communicate their obligations, especially in times of crisis. As educational modalities continue to evolve, this precedent will likely influence how contractual relationships between students and institutions are navigated in the judiciary.