Judge Dismisses Mount Ida College Class Action Lawsuit (Squeri, et al. v. Mount Ida College, et al.)
Approximately one year after Mount Ida College ceased operations and closed for business, the District Court for the District of Massachusetts has dismissed class action claims brought by its students against the college, the Board of Directors, and various administrative officers. Fundamental to the court’s decision was the question of what duty, if any, colleges owe to students when navigating situations of financial distress.
Plaintiffs alleged that Defendants committed fraud, negligent misrepresentation, and fraud in the inducement; breached their fiduciary duty; and breached their contract with students by failing to inform them of the college’s financial distress prior to closure. Moreover, the students alleged that Defendants violated their privacy rights when disclosing their academic and professional records pursuant to a teach-out with the University of Massachusetts (“UM”) Dartmouth.
As an initial matter, the court found that Defendants did not violate students’ privacy rights because there was a legitimate purpose to sharing their student information, namely, to facilitate their transfer and enrollment at UM Dartmouth. The court further dismissed Plaintiff’s claims of fraud, negligent misrepresentation, and fraud in the inducement after noting that Plaintiffs failed to identify any false statements made by Defendants and Mount Ida College’s audited financial disclosures, which showed that they were operating at a deficit since 2015, were available to view by the public.
Addressing Plaintiff’s claim that Defendants breached a fiduciary duty by failing to disclose Mount Ida College’s financial distress, the court determined that such a claim fails as a matter of law because no such duty exists under Massachusetts law. Notably, the court distinguished its recent recognition of a “special relationship” between students and their college from that of a fiduciary duty to students. Recall, last year, the Massachusetts Supreme Judicial Court held that a college’s “special relationship” with a student invokes a corresponding duty to take reasonable measures to prevent his or her suicide in limited circumstances. Here, the court made clear that this “special relationship” does not amount to a fiduciary duty and that the only fiduciary duty Defendants hold is to Mount Ida as a corporate entity.
Last, the court dismissed Plaintiff’s breach of contract claim for failure to identify specific terms or facts surrounding contract formation. The court reasoned, “Merely paying tuition in exchange for an education does not create a contract” and that “[u]ltimately, the lack of specificity is fatal to Plaintiffs’ breach of contract claim.”
The court’s decision comes on the heels of the Department of Education’s soon-to-be-released proposed regulations on school closures established through negotiated rulemaking earlier this year, as well as current consideration by the Massachusetts Legislature of Bill S.2183, which would require colleges to notify the state Board of Higher Education of “any known liabilities or risks which may result in the imminent closure of the institution or jeopardize the institution’s ability to fulfill its obligations to current and admitted students.” HMBR will continue to update you on these developments.
Should you have any questions or concerns about the possible implications of this ruling, please feel free to contact HMBR’s Higher Education Group at 312-946-1800.