Court Opinion

ID: 9410357
Source: CourtListenerOpinion
Date Created: 2023-07-21 00:00:43.548665+00
Date Added: 2024-06-11T17:20:57.148018
License: Public Domain

Case: 22-10433     Document: 00516827499         Page: 1    Date Filed: 07/20/2023

           United States Court of Appeals
                for the Fifth Circuit
                                                                      United States Court of Appeals
                                                                               Fifth Circuit

                                ____________                                 FILED
                                                                         July 20, 2023
                                  No. 22-10433                          Lyle W. Cayce
                                ____________                                 Clerk

   Luke Hogan, on behalf of himself and other individuals similarly situated,

                                                           Plaintiff—Appellant,

                                      versus

   Southern Methodist University, and other affiliated entities and
   individuals,

                                            Defendant—Appellee.
                  ______________________________

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:20-CV-2899
                  ______________________________

   Before Wiener, Southwick, and Duncan, Circuit Judges.
   Stuart Kyle Duncan, Circuit Judge:
          Luke Hogan, on behalf of a putative class of students, sued Southern
   Methodist University (“SMU”) for refusing to refund tuition and fees after
   the university switched to remote instruction during the COVID-19
   pandemic. The district court dismissed Hogan’s complaint for failure to state
   a claim. We REVERSE that decision in light of King v. Baylor University, 46
   F.4th 344 (5th Cir. 2022), which was issued after the district court’s ruling
   and which teaches that Hogan adequately pled a breach-of-contract claim.
   Alternatively, the district court held that Texas’s Pandemic Liability
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   Protection Act (“PLPA”) retroactively bars Hogan’s claim for monetary
   relief and is not unconstitutionally retroactive under the Texas Constitution.
   That latter ruling raises a determinative-but-unsettled question of state
   constitutional law, which we CERTIFY to the Texas Supreme Court.
                                         I.
          Hogan paid about $25,000 in tuition and $3,180 in mandatory fees to
   enroll in SMU for the Spring 2020 semester. He registered for on-campus,
   in-person classes. But due to the COVID-19 pandemic, SMU—like other
   Texas schools—suspended in-person classes in March 2020 and shifted to
   online instruction. As a result, students were able to continue their
   coursework, and Hogan himself successfully graduated at the end of the
   Spring 2020 semester. Even so, Hogan contends he did not receive the full
   benefit of his bargain. He claims that SMU’s shift to remote learning
   breached the University’s promise of “in person educational experiences,
   with all the appurtenant benefits offered by a first-rate university.” Because
   SMU did not refund students any tuition or fees, Hogan sued, asserting
   claims for breach of contract, conversion, and unjust enrichment.
          Hogan’s amended complaint alleges SMU promised to provide
   students with on-campus services as reflected in numerous representations.
   He points to the University’s website, marketing and orientation materials,
   admission application, acceptance letter, registration documents, course
   catalog, student handbook, and other documents. These materials, he claims,
   contain vivid descriptions of students on campus, benefiting from a unique
   community, and receiving a one-of-a-kind experience through in-person
   collaboration and instruction. Hogan posits these materials conveyed that
   “in person educational opportunities . . . were intrinsic aspects of the
   educational experience” for which students paid accordingly.

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          Additionally, Hogan’s complaint cites the Student Rights and
   Responsibilities Agreement (“Student Agreement”), which he claims
   represented a binding obligation to pay tuition and fees in exchange for
   “educational services . . . detailed” in the documents referenced above. This
   Agreement relevantly provides:
          I [the student] understand that the enrollment action
          constitutes a binding obligation between the student and
          Southern Methodist University and all proceeds of this
          agreement will be used for educational purposes and constitute
          an educational loan pursuant to 11 U.S.C. § 523(a)(8).
   By disbanding in-person classes, Hogan insists SMU failed to hold up its end
   of the bargain.
          Hogan filed this putative class action in Texas state court in August
   2020, on behalf of himself and all individuals who paid SMU tuition for in-
   person educational services during the Spring 2020 semester. He sought
   monetary, injunctive, and declaratory relief. SMU removed the action based
   on diversity jurisdiction to the Northern District of Texas.
          Nearly a year later, in June 2021, the Texas Legislature enacted the
   PLPA, which retroactively shields the State’s educational institutions (as
   well as entities in other fields) from monetary liability arising from their
   response to the pandemic. Tex. Civ. Prac. & Rem. Code § 148.004.
   Relevant here, the PLPA provides:
          An educational institution is not liable for damages or equitable
          monetary relief arising from a cancellation or modification of a
          course, program, or activity of the institution if the cancellation
          or modification arose during a pandemic emergency and was
          caused, in whole or in part, by the emergency.
   Tex. Civ. Prac. & Rem. Code § 148.004(b).

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          SMU moved to dismiss under Rule 12(b)(6), contending that Hogan
   failed to allege an actionable contract and that his claims for unjust
   enrichment and conversion failed as a matter of law. Alternatively, SMU
   asserted that Hogan’s claims were barred by the educational malpractice
   doctrine. And even if Hogan did state a plausible claim, SMU contended that
   the PLPA retroactively barred Hogan’s suit. In response, Hogan primarily
   argued that he adequately pled an implied contract for in-person services. But
   he argued alternatively that, if the court determined the Student Agreement
   was an express contract, the agreement obligates SMU to provide on-
   campus educational services. Finally, while Hogan conceded the PLPA
   barred his claim for money damages, he argued that the law was
   unconstitutionally retroactive under the Texas Constitution.
          The district court granted SMU’s motion, dismissing Hogan’s claims
   with prejudice. It concluded that Hogan’s breach-of-contract claim failed to
   meet federal pleading standards by not alleging a specific contractual promise
   that SMU violated; that his unjust enrichment and conversion claims failed
   under Texas law; and, alternatively, that the PLPA was constitutional and
   barred Hogan’s claim for monetary relief. Hogan timely appealed.
                                        II.
          We review de novo the grant of a motion to dismiss under Rule
   12(b)(6), accepting all well-pled facts as true and viewing them in the light
   most favorable to the plaintiff. Retana v. Twitter, Inc., 1 F.4th 378, 380 (5th
   Cir. 2021). To survive such a motion, a plaintiff must “state a claim to relief
   that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
   (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim is
   facially plausible when its factual matter allows us to draw a ‘reasonable
   inference that the defendant is liable for the misconduct alleged.’” Ghedi v.
   Mayorkas, 16 F.4th 456, 463 (5th Cir. 2021) (quoting Iqbal, 556 U.S. at 678).

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   Though a complaint need not contain “detailed factual allegations,” the
   federal rules “demand[] more than an unadorned, the-defendant-unlawfully-
   harmed-me accusation.” King, 46 F.4th at 355 (citation omitted).
                                       III.
          On appeal, Hogan challenges only the district court’s dismissal of his
   breach-of-contract claim and its ruling on the PLPA’s constitutionality.
   First, he claims the court erred by overlooking his claim that SMU breached
   the Student Agreement by discontinuing in-person instruction. Second, he
   contends the PLPA violates the Texas Constitution’s retroactivity clause as
   applied to his claim. We consider each issue in turn.
                                        A.
          The district court dismissed Hogan’s breach-of-contract claim,
   finding his allegations “long on words but short on actionable detail.” The
   court did not address Hogan’s alternative argument that the parties’ Student
   Agreement was an enforceable contract for in-person classes. In its ruling,
   the court noted its alignment with two other district court decisions that had
   dismissed similar claims: Jones v. Administrators of Tulane Educational Fund,
   No. CV 20-02505, 2021 WL 5097769 (E.D. La. Sept. 29, 2021), and King v.
   Baylor University, No. 6-20CV-00504-ADA, 2021 WL 1226562 (W.D. Tex.
   Mar. 31, 2021).
          Since then, however, our court has reversed both of those decisions.
   See King, 46 F.4th at 344; Jones v. Adm’rs of Tulane Educ. Fund, 51 F.4th 101
   (5th Cir. 2022). Most pertinent here is King. The plaintiff there sought a
   partial refund of her Spring 2020 tuition, claiming that Baylor’s shift to
   online instruction breached its agreement to provide in-person educational
   services. King, 46 F.4th at 354. She pointed to Baylor’s Financial
   Responsibility Agreement (“FRA”), which states in relevant part:

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          I further understand and agree that my registration at Baylor
          and acceptance of the terms of this [FRA] constitutes a
          promissory note agreement . . . in which Baylor is providing me
          educational services[.]
   Id. at 353. The parties sparred over whether the term “educational services”
   obligated Baylor to provide in-person instruction. See id. at 361–63. Declining
   to resolve this dispute, the district court dismissed King’s complaint because
   the FRA did not explicitly promise in-person classes. Id. at 355.
          We reversed. After finding the FRA to be a valid contract, we held
   that there is a “legitimate question” as to whether “‘educational services’ is
   ambiguous.” Id. at 361. Accordingly, we remanded for the district court to
   determine whether “educational services” is susceptible to more than one
   reasonable interpretation. Id. at 362–63. And, even if the term could include
   online courses, we explained that the district court “must examine . . . [the]
   circumstances surrounding the formation of [the] contract” to determine
   whether King contracted with Baylor for on-campus services only. Id. at 363
   (citation omitted); see also id. at 373–74 (Duncan, J. concurring).
          King compels us to reverse the district court’s ruling that Hogan failed
   to plead a breach-of-contract claim. Similar to King, the parties here offered
   competing interpretations as to whether the Student Agreement is an
   enforceable contract for on-campus instruction. Hogan argued that SMU’s
   promise to use tuition for “educational purposes” includes applying such
   payments towards “in person . . . educational experiences.” For its part,
   SMU argued that the agreement imposes no constraints on SMU’s use of
   tuition funds, much less a promise to provide students with in-person classes.
   The district court did not resolve this dispute, nor did it consider whether
   Hogan’s “capacious interpretation of ‘educational [purposes]’ is reasonable,

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   and if so, whether the term is latently ambiguous.” King, 46 F.4th at 363. We
   must therefore reverse. 1
                                                B.
           Hogan next challenges the district court’s ruling that the PLPA
   retroactively bars the damages he seeks. He contends this application of the
   PLPA violates the Texas Constitution’s retroactivity clause. 2 See Tex.
   Const. art. I, § 16 (“No bill of attainder, ex post facto law, retroactive law,
   or any law impairing the obligation of contracts, shall be made.”).
           Hogan’s argument raises a hard question under Texas law. Neither
   the Texas Supreme Court nor any other Texas court has yet decided whether
   the PLPA is unconstitutionally retroactive. Two federal district courts have
   split on how to answer the question. 3 Given this legal obscurity and the
           _____________________
           1
              Alternatively, SMU argues Hogan’s claim runs afoul of the educational
   malpractice doctrine, which bars claims premised on students’ dissatisfaction with the
   quality of their education. See, e.g., Ross v. Creighton Univ., 957 F.2d 410, 414 (7th Cir.
   1992). We disagree. Even assuming Texas would apply this doctrine, we have already
   rejected its applicability to claims like Hogan’s. As we explained in Jones, a straightforward
   breach-of-contract claim that a school failed to provide in-person classes does not implicate
   the educational malpractice doctrine. 51 F.4th at 110. Such a claim does not “challenge the
   quality of education received” but merely alleges that the school failed to fulfill an
   “objective” contractual promise. Ibid.; see also Gociman v. Loyola Univ. of Chi., 41 F.4th
   873, 882–83 (7th Cir. 2022) (same).
           2
             For the first time on appeal, Hogan argues that the PLPA also violates the
   respective contract clauses of the United States and Texas Constitutions. He has forfeited
   these arguments by failing to raise them before the district court. See United States v.
   Fernandez, 48 F.4th 405, 412 (5th Cir. 2022).
           3
            Compare Hogan v. S. Methodist Univ., 595 F. Supp. 3d 559, 568–72 (N.D. Tex.
   2022) (finding that, because Hogan lacked settled expectations as he failed to fully
   adjudicate his claims before the law took effect, his “right to recover damages [was]
   nonexistent at worst . . . or unpredictable at best” ), with King v. Baylor Univ., No. 20-CV-
   00504-DC, 2023 WL 2518335, at *3–11 (W.D. Tex. Mar. 11, 2023) (disagreeing with the
   Hogan district court that the retroactivity clause protects only “claims with near-certain
   recovery prospects”).

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   “significant state interests” underlying the PLPA, the better course is to
   certify this question to the Texas Supreme Court. Associated Mach. Tool
   Techs. v. Doosan Infracore Am., Inc., 745 F. App’x 535, 539 (5th Cir. 2018)
   (unpublished).
          “The Texas Constitution grants the Supreme Court of Texas the
   power to answer questions of state law certified by a federal appellate court,”
   provided the question is determinative and not settled by that Court’s
   precedent. Silguero v. CSL Plasma, Inc., 907 F.3d 323, 332 (5th Cir. 2018); see
   also Tex. Const. art. V, § 3-c(a); Tex. R. App. P. 58.1. On our end, we
   consider three factors before certifying a question:
          (1) the closeness of the question and the existence of sufficient
          sources of state law;
          (2) the degree to which considerations of comity are relevant
          in light of the particular issue and case to be decided; and
          (3) the practical limitations of the certification process:
          significant delay and possible inability to frame the issue so as
          to produce a helpful response on the part of the state court.
   Fire Prot. Serv., Inc. v. Survitec Survival Prods. Inc., 18 F.4th 802, 804 (5th Cir.
   2021) (quoting Silguero, 907 F.3d at 332). These factors all counsel certifying.
          First, the PLPA’s constitutionality as applied to Hogan’s claim is a
   close and unsettled issue. The Texas Constitution generally prohibits
   retroactive laws. Tex. Const. art. I, § 16. This prohibition “advances two
   fundamental objectives of [Texas’s] system of government: the protection of
   ‘reasonable, settled expectations’ and protection against ‘abuses of
   legislative power.’” Fire Prot. Serv., Inc. v. Survitec Survival Prods., Inc., 649
   S.W.3d 197, 201–02 (Tex. 2022) (quoting Robinson v. Crown Cork & Seal Co.,
   335 S.W.3d 126, 139 (Tex. 2010)).

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          But “not all statutes that apply retroactively are constitutionally
   prohibited.” Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d.
   212, 219 (Tex. 2002). Separating the wheat from the chaff requires weighing
   the so-called Robinson factors: (1) “the nature and strength of the public
   interest served by the statute as evidenced by the Legislature’s factual
   findings”; (2) “the nature of the prior right impaired by the statute”; and
   (3) “the extent of the impairment.” Tenet Hosps. Ltd. v. Rivera, 445 S.W.3d
   698, 707 (Tex. 2014) (quoting Robinson, 335 S.W.3d at 146). On the one hand,
   the Robinson “test acknowledges the heavy presumption against retroactive
   laws,” defeasible only by a compelling public interest. Ibid. On the other, the
   Texas Supreme Court warns that “statutes are not to be set aside lightly,”
   stressing that it has invalidated statutes as illicitly retroactive only a handful
   of times. Robinson, 335 S.W.3d at 146; see also DeJoria v. Maghreb Petroleum
   Expl., S.A., 935 F.3d 381, 389 (5th Cir. 2019). Recently, the Court clarified
   that “a law is not retroactive in the constitutional sense unless it disrupts or
   impairs settled expectations.” Fire Prot. Serv., 649 S.W.3d at 201.
          The parties agree that the PLPA retroactively bars Hogan’s
   requested relief for monetary damages, but they understandably differ over
   whether that effect is constitutional. Hogan argues the PLPA is doomed by
   all three Robinson factors. He insists that the PLPA serves no compelling
   public interest and that the law eviscerates his well-settled expectations in an
   accrued breach-of-contract claim. While recognizing that the Texas Supreme
   Court has upheld laws retroactively winnowing plaintiffs’ remedies, Hogan
   argues that Court has not done so when a law obliterates any right to
   recovery, as he asserts the PLPA does here.
          SMU—joined by the Texas Attorney General as amicus curiae—takes
   the opposite view. SMU argues that the Texas Legislature explicitly found
   that the PLPA serves a compelling public interest in safeguarding Texas’s
   strained educational system from a foreseeable onslaught of COVID suits.

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   SMU also claims that Hogan lacks settled expectations in his claim because
   his suit was still in its infancy when the PLPA was born. Nor, according to
   SMU, does the PLPA obliterate his claim because he can still pursue
   declaratory and injunctive relief.
          We have no trouble concluding that this question is close enough to
   warrant certification. True, we have the Robinson factors. But applying them
   to this new problem is another matter. For example, we find it hard to answer
   under existing Texas law whether the PLPA impairs Hogan’s well-settled
   expectations. SMU points to Texas cases explaining that laws “are usually
   not unconstitutionally retroactive” if they “merely affect[] remedies.”
   Dejoria, 935 F.3d at 388 (emphasis added). That is because “remedial laws
   generally do not affect vested rights.” City of Austin v. Whittington, 384
   S.W.3d 766, 790 (Tex. 2012) (emphasis added). All true. But how does that
   general principle apply here? The PLPA strips Hogan of any damages
   remedy, and it is unclear (at least to us) how an injunction would give him
   anything meaningful. He has graduated, after all.
          Second, comity counsels certification. Robinson itself teaches that
   “courts must be mindful that statutes are not to be set aside lightly” as
   impermissibly retroactive. 335 S.W.3d at 146. “That is even truer for us, as
   we are being asked to apply a state constitutional provision to prevent the
   application of state law to a contract which is itself a creature of state law.”
   Fire Prot. Serv., 18 F.4th at 805. Further, the parties ask us to weigh in on a
   Texas statute that purports to protect myriad Texas institutions from
   potentially dire financial fallout. We think it best to let Texas’s high court say
   what Texas law is, rather than “Erie-guessing our way into uncharted
   waters.” Id. at 805.
          Finally, we see no practical impediments to certifying. The question,
   though deep, is easy enough to frame. And certifying will help declutter our

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   own docket, as we face a similar challenge to the PLPA in another pending
   appeal, King v. Baylor University, No. 23-50259.
                                         IV.
          Accordingly, we CERTIFY the following question to the Texas
   Supreme Court:
          Does the application of the Pandemic Liability Protection Act
          to Hogan’s breach-of-contract claim violate the retroactivity
          clause in article I, section 16 of the Texas Constitution?
   We respectfully ask the Texas Supreme Court to give us its determination of
   this state-law issue, which will be binding on our court. We disclaim any
   intention or desire that the supreme court confine its reply to the precise form
   or scope of the question certified.
                                                       Question Certified.

                                                     A True Copy
                                                     Certified Jul 20, 2023

                                                     Clerk, U.S. Court of Appeals, Fifth Circuit

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