Opinion ID: 4519505
Heading Depth: 2
Heading Rank: 1

Heading: The Breach of Fiduciary Duty Claim Fails

Text: The plaintiffs' primary argument on appeal is that both the individual defendants and Mount Ida itself owed current and prospective Mount Ida students a fiduciary duty. They argue the district court erred by ending its duty analysis after concluding that the relationship between student and college does not give rise to a fiduciary duty to students as a matter of law. They assert that since the [s]tudents pled that the relationship between the parties was founded on faith, trust and confidence, those allegations alone give rise to a fiduciary duty claim. The argument is based on a misunderstanding of Massachusetts law. They further argue that this Court should hold as a matter of law that colleges and universities owe a fiduciary duty to [their] students. Massachusetts law firmly establishes that there is no such fiduciary duty between Mount Ida's officers or trustees and Mount Ida students on the claims here. See Morris v. Brandeis Univ., 804 N.E.2d 961, 961 (Mass. App. Ct. 2004) (unpublished) (tbl.) (concluding that [t]here was no fiduciary relationship between a student and a university administrator/advisor in a case involving suspension of a student for plagiarism). Indeed, - 17 - the fiduciary duty on the individual defendants is imposed by statute, Mass. Gen. Laws ch. 180, § 6C, and is owed to the college. Common law courts are not free to impose additional and likely conflicting fiduciary duties not imposed by statute. In ch. 180, § 6C, the Massachusetts legislature has imposed a fiduciary duty on directors and officers, but that duty is owed to the institution, here Mount Ida. That duty is to act in good faith and in a manner [the director or officer] reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position . . . would use under similar circumstances. Id. The duty is not owed to students. See Estate of Moulton v. Puopolo, 5 N.E.3d 908, 921 (Mass. 2014) (Directors of a corporation stand in a fiduciary relationship to that corporation and have a duty to protect its interests 'above every other obligation.' (quoting Am. Disc. Corp. v. Kaitz, 206 N.E.2d 156, 160 (Mass. 1965))). The interests of the students alleged on the facts here are in direct conflict with those of the institution. Early disclosure of financial distress might well have endangered the ability of the institution to recover and made the financial distress even worse. The Massachusetts AGO recognized in its March 13, 2019, letter that premature notice of financial instability can result in a 'self-fulfilling prophecy.' Indeed, even the plaintiffs recognize that the trustees ran the risk of students - 18 - deciding not to enroll if a gloomy picture of Mount Ida's financials were painted. Further, Mount Ida itself did not owe a fiduciary duty to the students, and we reject the plaintiffs' assertion that this court should expand the law and establish a fiduciary duty between a college and its students. Federal courts are not free to extend the reach of state law, Doe v. Trs. of Bos. Coll., 942 F.3d 527, 535 (1st Cir. 2019), at least not where there are Massachusetts law and precedent suggesting the contrary, see Mu v. Omni Hotels Mgmt. Corp., 882 F.3d 1, 9 (1st Cir.), review denied, 885 F.3d 52 (1st Cir. 2018).7 The Massachusetts legislature just after these events occurred addressed the issue of how to improve the financial stability of higher education institutions going forward. The legislature decided yet again in the new legislation not to impose the duty that the plaintiffs now advocate should be imposed on the college itself. See An Act to Support Improved Financial Stability in Higher Education, 2019 Mass. Acts ch. 113. Rather, the statute 7 We also deny the plaintiffs' motion to certify this question to the Supreme Judicial Court (SJC). The plaintiffs chose to be in federal court. They did not ask the district court to certify any question. Nor did they develop this request in their appellate briefs. The motion was first made after briefing and shortly before oral argument. In addition, we see no question to certify. Massachusetts law is clear that no fiduciary duty to plaintiffs exists in these circumstances. - 19 - mandates that every higher education institution post financial information on its website and immediately notify the [Massachusetts Board of Higher Education (BHE)8] of any known financial liabilities or risks that are reasonably likely to result in the imminent closure of the institution or otherwise negatively affect the institution’s ability to fulfill its obligations to current and admitted students. Id. Massachusetts courts have repeatedly stated that the relationship between an institution of higher education and its students is generally not a fiduciary one. See Williamson v. Bernstein, No. 951471, 1996 WL 1185104, at  (Mass. Super. Ct. Feb. 20, 1996) (The relationship between students and universities is generally contractual rather than fiduciary.); see also Morris, 804 N.E.2d at 961 (stating that plaintiff had failed to assert any particular facts in this case that would 8 The old and new laws imposed new duties on the BHE. The new statute requires the BHE to annually assess the finances of such institutions and to determine if an institution may be at risk of imminent closure. 2019 Mass. Acts ch. 113. Only such a determination by the BHE triggers the obligation of the institution to prepare a contingency plan for closure, which shall include a process for the institution or the board, or both, as determined by the board, to provide appropriate notification to relevant stakeholders, as determined by the board, including, but not limited to, enrolled students, candidates who have submitted applications, recent graduates, faculty, staff and host communities. Id. - 20 - warrant the imposition of a heightened duty upon [his university]).9 There is another reason the plaintiff students fail to state a breach of fiduciary duty claim. Whether viewed under the rubric of standing or some related doctrine, Massachusetts law restricts to the AGO the ability to pursue claims of mismanagement of charitable organizations. See Mass. Gen. Laws ch. 12, § 8 (The attorney general shall enforce the due application of funds given or appropriated to public charities within the commonwealth and prevent breaches of trust in the administration thereof.). The SJC has said: The law has provided a suitable officer to represent those entitled to the beneficial interests in a public charity. It has not left it to individuals to assume this duty, or even to the court to select a person for its performance. Nor can it be doubted that such a duty can be more satisfactorily performed by one acting under official responsibility than by individuals, however honorable their character and motives may be. 9 While the SJC has recently recognized duties in the context of particular individuals at colleges who fail to act reasonably to alleviate risk where they have knowledge of a student's high risk of suicide, no such facts are presented here. See Nguyen v. Mass. Inst. of Tech., 96 N.E.3d 128, 142 (Mass. 2018). In Nguyen, the SJC recognized that a college has a special relationship with a student and a corresponding duty to take reasonable measures to prevent suicide in narrow circumstances. Id. Nguyen does not address the presence of a fiduciary duty between a college and its entire student body nor does it say anything about whether this special relationship could give rise to a fiduciary duty, as the plaintiffs argue. - 21 - Weaver v. Wood, 680 N.E.2d 918, 922 (Mass. 1997) (quoting Burbank v. Burbank, 25 N.E. 427, 428 (Mass. 1890)). And there is no plausible argument that the claims advanced here fall within any special standing exception articulated by the Massachusetts Appeals Court in Harvard Climate Justice Coalition v. President and Fellows of Harvard College. 60 N.E.3d 380, 382-83 (Mass. App. Ct. 2016) (concluding that student plaintiffs lacked standing to pursue claims that charitable organization had been mismanaged because they fail[ed] to show that they [had] been accorded a personal right in the management or administration of [the school's] endowment that is individual to them or distinct from the student body or public at large).10