Colleges should be grateful for 'Zoom school' lawsuits

COVID litigation is back with a vengeance and U.S. colleges and universities might be in trouble. Last week, the U.S. Court of Appeals for the District of Columbia Circuit reinstated a pair of lawsuits alleging that American University and George Washington University, by switching to online instruction when infection fears were at their height, breached their contracts with students.

Though I've been skeptical of the student's claims in the past, I've come around to the view that they have a point.

After most institutions of higher learning moved to remote learning early in the pandemic, lawsuits were filed across the country by students seeking refunds of tuition and fees. The great majority of those cases have been dismissed, as these two initially were, because the contract between the students and the colleges — all those pages one signs before enrolling — made no promise that instruction would be in person.

According to the D.C. Circuit, however, even in the absence of an explicit promise by the schools, the contract might have been made against a background understanding that tuition payments purchase not simply instruction but an on-campus experience. This understanding in turn would be sufficient to create what scholars nowadays call a default rule — a provision to be read into the contract unless a party negotiates to get rid of it.

By offering a discount, say.

Was there a background understanding when the students enrolled that classes would be held on campus? Sure looks that way. As Judge Harry Edwards points out in his excellent opinion, the materials used by the defendants themselves to recruit students are replete with references to both classroom instruction and the wider campus experience. Makes sense: Schools extol their campuses because they know that potential freshmen care.

High-schoolers' decisions about where to apply are driven by more than academics. Yes, those U.S. News and World Report rankings matter. A lot. But the campus experience also influences student choice. Even among selective colleges, strong rankings for quality-of-life garner more applications than peers whose campus life is worse. So does success in major sports. So we shouldn't be the least bit surprised to learn that for every dollar devoted to academics, colleges spend about 51 cents on amenities.

In setting budget priorities, schools are responding to demand. A 2021 analysis found that for the median student, some 4.2% of the cost of attending an institution of higher learning represents the value of in-person instruction, while a whopping 8.1% represents the value of on-campus social activities. If these figures are accurate, the move to online learning cost the students over 12% of what they thought they were buying.

Moreover, schools themselves implicitly suggest that the dollar value of an education delivered on campus differs from the dollar value of an education delivered remotely. Judge Edwards points out that both George Washington and American offer some degree programs that don't require students to be in residence — and grant significant tuition discounts to students who choose to take courses remotely. (One might reasonably ask whether most of the difference in price between remote and in-person instruction might represent overhead. Unless the tail is wagging the dog, the answer is surely no. Otherwise, both colleges and students would be better off if campuses were shut down permanently.) The ability of the schools to price discriminate means that those who prefer in-person instruction believe they're receiving a benefit that remote learners aren't; otherwise they wouldn't pay more. The benefit can't be the quality of the instruction alone, because both groups receive the same degree. Thus even the schools realize that they're selling in-person students a premium product.

That an institution of higher learning would even try to deny this understanding is bizarre. Everyone who's spent time in college knows that tuition buys more than teaching. The networking that will be so crucial later in life takes place on campus. I made more friends through my long hours laboring at the campus newspaper than I did through classes, labs, and study groups. I sharpened my intellect during nights at the coffee house, playing speed chess and debating fine points of radical politics. (Game theory I learned the hard way, at the poker table.)

Colleges should embrace this richer understanding of what they offer, not flee from it to save a buck in litigation. Higher education is nowadays under fire on many fronts. Some critics even dismiss classroom learning as an archaic technology that has outlived its usefulness. Schools should be offering a full-throated defense of their value, even if doing so costs money in the short run.

It's true that the pandemic was unanticipated. But as Judge Edwards explains, the mere fact that nobody knew COVID was coming doesn't give colleges the right to "allocat[e] the financial risk of those events to the students." Other businesses haven't been allowed to dump pandemic losses onto customers. Colleges shouldn't want to.

I can't predict what will happen on remand to the trial court. But Judge Edwards's opinion hems the defendants in. They're stuck with their own advertising — and with the implicit wider understanding of what higher education entails.

For this they should be grateful.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Stephen L. Carter is a Bloomberg Opinion columnist. He is a professor of law at Yale University and was a clerk to U.S. Supreme Court Justice Thurgood Marshall.