Monday, November 5, 2007
Court of Appeal Says University of California Must Refund Fee Hike
By STEVEN M. ELLIS, Staff Writer
The University of California breached a contractual relationship with thousands of its students when it raised fees beginning in 2003, the First District Court of Appeal ruled Friday.
Div. Two unanimously affirmed now-retired San Francisco Superior Court Judge James L. Warren’s ruling that the university’s actions with respect to graduate students in its professional schools breached implied contracts that arose when the university promised on its Web site and in catalogues that professional education fees would not be raised for the duration of the students’ enrollment.
The panel also affirmed Warren’s ruling that the university breached contracts into which it had entered with other students when the students paid the university exact amounts set forth in bills the university sent to them.
As a result, the court upheld an award of $33.8 million in damages against the university for all of the fee increases which affected more than 9,000 professional students and 47,000 other students.
The case started in 2003, when eight current or former students filed breach of contract claims on behalf of three subclasses of students: professional students who first enrolled in their respective degree programs prior to Dec. 16, 2002 and who paid an increased professional degree fee after that date; students who were billed educational or professional degree fees for the spring 2003 semester, and who paid such fees prior to receiving individualized notice that the fees would be increased for that semester; and students subject to similar circumstances for the summer 2003 semester.
The trial court found that enforceable contracts existed between each of the three subclasses of students and the university, and that the university breached those contracts by increasing the fees.
Dismissing the university’s argument that it had warned students in a disclaimer that professional degree fees could be increased as “irreconcilable” with its promises not to raise the fees, Warren concluded that the more specific promise not to increase the fee for the duration of a student’s enrollment was an exception to the general disclaimer.
Enrollment Was Acceptance
He also reasoned that the contract term at issue for the 2003 spring and summer student subclasses was the price for a specific semester or term, and the university’s publications containing price information regarding upcoming semesters or terms were therefore advertisements or invitations to enter a contract. When students enrolled in the classes, they made offers to purchase which the University accepted by sending bills, he said.
Stating that the university’s position that it could raise fees by any amount at any time would put “students at the complete mercy of the University” and were unconscionable, the trial court held that once the university billed or assessed students a certain price for the terms and, in many cases, accepted payment, it could not unilaterally demand a higher price without providing new consideration.
The parties stipulated to the damages suffered by the subclasses, but the university sought to reduce the damages by the amount of grant money received by students. Although the trial court rejected this argument on the basis that students could have used grant money for other costs and expenses had they not been compelled to use it to pay fees, it did acknowledge that grant money had been increased somewhat as a result of the fee increase, and offset the amount of damages by the increases in grant awards.
On appeal, Justice James R. Lambden, joined by Justices Paul R. Haerle and James A. Richman, agreed with the trial court that the university had breached its contractual obligations to the professional students.
“The University had complete control over what language to use in its catalogues and on its websites,” Lambden wrote.
“[It]chose to declare that fees could change at any time at the same time it promised that one type of fee, the [professional degree fee], would not be raised for continuing students. If the University intended to retain the right to raise the [professional degree fee]for continuing students, it should have so specified.”
He also rejected the university’s argument that the professional degree fee increases were necessary to make up for a budget shortfall, noting that, “economic crises do not excuse performance on a contract,” and wrote that the university could not raise the other students’ fees after it had already billed them.
“[O]nce the student is told that he or she can enroll at a particular price and must pay that particular sum by a certain date, the student should reasonably be able to expect that fee has now become firm,” he said.
Danielle E. Leonard of the law firm of Altshuler, Berzon, Nussbaum, Rubin & Demain, co-counsel for the plaintiffs, told the MetNews that her clients were very pleased with what she characterized as a “well reasoned” decision.
“The court’s decision confirms that students can hold the university to its word with respect to price increases,” she said.
University spokesperson Ricardo Vazquez said that counsel was still analyzing the opinion to determine the university’s options, and that no decision on whether to appeal had yet been reached.
The case is Kashmiri v. The Regents of the University of California, 2007 S.O.S. 6499.
Copyright 2007, Metropolitan News Company