Meng v. The New School

Background

Lily Meng sued The New School on behalf of herself and a proposed class of students. She alleged that, when she enrolled as an undergraduate student for the Spring 2020 semester, she and similarly situated students entered into an implied contract for generally in-person, on-campus courses, activities, facilities, and services. Meng alleged that students could choose between online and in-person courses and that she selected exclusively in-person courses.

In March 2020, in response to the COVID-19 pandemic, The New School moved classes online and canceled in-person classes for the rest of the semester. Meng alleged that the change, together with the closure of related campus facilities, provided an education of less value than the one for which students had contracted. She also alleged that the online program significantly reduced the school’s costs, allowing The New School to retain tuition and fees and receive a financial benefit.

The New School’s motion

The New School moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally valid claim. It argued that Meng had not adequately alleged an unqualified promise to provide in-person education, that impossibility excused the school’s performance, that she had not alleged a legally recognizable injury, and that she waived any contractual rights by attending remote classes and accepting course credits.

The school also argued that Meng’s unjust-enrichment claim failed because an implied contract covered the subject matter and because retaining the tuition and fees was not unfair under the circumstances.

Breach-of-contract claim

Applying New York law, the court explained that enrolling in a university creates an implied contract between the school and the student. To state a breach-of-contract claim, a plaintiff must allege an agreement, performance by the plaintiff, a breach by the defendant, and damages.

The court concluded that Meng’s allegations met the applicable pleading standard. Relying on the Second Circuit’s decision in Rynasko v. New York University, the court held that she did not need to identify a specific promise that classes would be exclusively in person under every circumstance. Her allegations that she chose in-person courses, that The New School’s materials emphasized campus resources and on-campus coursework, and that in-person education was canceled for about half the semester plausibly supported a mutual expectation of generally in-person education and services.

The court rejected The New School’s argument that the pandemic itself defeated the existence of any contractual promise. The reason for an alleged breach generally does not determine whether an agreement existed. The court said that impossibility or impracticability—a defense that may excuse performance in extreme circumstances—could address the pandemic-related circumstances, but that defense could not be resolved on a motion to dismiss.

The court also found that disclaimers in The New School’s course catalog and website, reserving the right to change various matters without notice, did not unambiguously authorize moving all coursework online. The disclaimers therefore were not a basis for dismissing the claim at this stage.

The court further rejected the argument that completing half the semester in person meant there was no breach. Meng alleged that in-person education was canceled for approximately half of the entire semester, which was enough to plausibly allege a breach.

The court held that the impossibility defense could not be resolved on the existing pleadings. It noted that impossibility or frustration of purpose may result in rescission or repayment obligations and that factual questions remained about whether in-person classes could have resumed during part of the semester. The court also held that Meng plausibly alleged damages based on the difference between the value of the in-person education allegedly promised and the value of the online education received. The fact that The New School charged the same tuition for both forms of education did not establish that Meng suffered no compensable harm.

Finally, the court declined to dismiss based on waiver. Waiver means voluntarily giving up a known right. Meng’s continued attendance, remote coursework, and acceptance of course credits were, at most, ambiguous actions and did not clearly establish that she intended to give up a claim for damages.

Unjust-enrichment claim

Under New York law, unjust enrichment requires allegations that the defendant was enriched at the plaintiff’s expense and that fairness and good conscience do not permit the defendant to retain the benefit.

The court held that Meng plausibly alleged unjust enrichment. Even if closing the campus was reasonable or unavoidable, that did not necessarily make it fair for The New School to retain all of the tuition and fees if, as alleged, online instruction cost substantially less than on-campus instruction. Whether the school actually saved money or whether it was fair for the school to retain the funds required factual development.

The court also rejected the argument that the implied contract automatically barred unjust enrichment. Although unjust enrichment ordinarily is unavailable when an enforceable contract covers the same subject, Meng could plead the theory in the alternative at this stage. If the implied contract were later found unenforceable—for example, because of impossibility—an unjust-enrichment claim might still be available.

Disposition and significance

The court denied The New School’s motion to dismiss the complaint. Both Meng’s breach-of-contract claim and unjust-enrichment claim were allowed to proceed. The order did not determine liability, the amount of any damages or refund, whether a class would be certified, or whether The New School’s defenses would ultimately succeed.