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Law360 (June 28, 2021, 10:44 PM EDT) -- The First Circuit on Monday declined to revive a proposed class action launched by a Harvard student after COVID-19 abruptly swapped her study abroad program with online coursework, finding that the study abroad provider did not breach its contract with program participants when it implemented a no-refund policy for most students.
In an 18-page opinion, a three-judge panel determined that a lower court got it right when it found that the Council on International Educational Exchange was not required to issue plaintiff Annie Zhao a refund since the study abroad program had already started.
Under CIEE's "Program Participant Contract," the program cancellation portion indicates that refunds are specifically made available when a program is canceled before it begins.
"The contract unambiguously provides that Zhao could only expect a refund if the program were cancelled prior to the start of her study abroad experience," the panel wrote in its opinion.
Zhao's proposed class action was first launched last June in Maine state court and was subsequently removed to a federal venue by CIEE.
Zhao was studying abroad in the Netherlands right as COVID-19 began spreading uncontrollably across the globe, which resulted in the program moving online, according to court documents.
Though CIEE was wise to cancel its study abroad programs in light of the pandemic, Zhao argued that it should not have left "financially strapped young adults" with 100% of the financial burden after it refused to refund their tuition.
She continued that students paid for the study abroad experience, not an "online education from their kitchen tables," court documents show.
But last August, U.S. District Judge Lance E. Walker granted CIEE's motion to dismiss the suit after agreeing with the program provider that the terms and conditions, along with other components of the contract, limited its obligations to participants.
On appeal, Zhao argued that CIEE did not meet its obligation in offering participants a true study abroad experience and instead, moved its programs onto a lower quality online platform.
Under paragraph 14 of the disputed contract, Zhao said that she, along with thousands of other students in her situation, have a right to be compensated for the "difference in value between the services CIEE agreed to deliver and those she and the other students received after the program moved online."
Paragraph 14 of the contract states that "[i]n the unlikely event that a program is cancelled (due to low enrollment or any other reason), CIEE will refund all payments received but will have no further liability to participant."
CIEE, however, contended that the lower court was right to find that the contract was unambiguous.
And on Monday, the First Circuit affirmed that the participant contract absolves CIEE of Zhao's refund bid.
The panel observed that a portion of the contract — specifically paragraph 14 — outlined the potential for refunds in certain circumstances, but noted that "contractual interpretation does not start and end on reading one phrase in isolation."
It continued that CIEE moving its programs online so that participants could continue their academic studies complied with both the program cancellation portion and paragraph 14.
"The district court thus did not err when it held that Paragraph 14 was limited by other provisions of the Participant Contract, namely the unambiguous language in the Terms and Conditions' Program Cancellation section," the panel wrote. "More so considering that the Participant Contract and its addendums must be read together."
Sigmund D. Schutz, an attorney representing Zhao, told Law360 on Monday that the "court concluded that CIEE didn't mean what it said when it promised students" a refund under paragraph 14 of the contract.
Counsel for CIEE did not immediately respond to Law360's requests for comment on Monday.
U.S. Circuit Judges Jeffrey R. Howard and O. Rogeriee Thompson and U.S. District Judge Raúl M. Arias-Marxuach, sitting by designation, sat on the panel for the First Circuit.
Zhao is represented by Sigmund D. Schutz of Preti Flaherty Beliveau & Pachios LLP.
CIEE is represented by Chad W. Higgins of Bernstein Shur.
The case is Zhao v. CIEE Inc. et al., case number 20-1878, in the U.S. Court of Appeals for the First Circuit.
--Editing by Michael Watanabe.
For a reprint of this article, please contact reprints@law360.com.
