United States Court of Appeals For the First Circuit
No. 19-1624
TRISTAN SQUERI, individually and on behalf of all others similarly situated; MADELINE MCCLAIN, individually and on behalf of all others similarly situated; GEORGE O'DEA, individually and on behalf of all others similarly situated,
Plaintiffs, Appellants,
v.
MOUNT IDA COLLEGE; THE MOUNT IDA COLLEGE BOARD OF TRUSTEES; CARMIN C. REISS, individually and as a representative of Mount Ida College Board of Trustees; BARRY BROWN, individually and as a representative of Mount Ida College; JEFF CUTTING, individually and as a representative of Mount Ida College; RON AKIE, individually and as a representative of Mount Ida College; JASON POTTS, individually and as a representative of Mount Ida College,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Stahl, and Kayatta, Circuit Judges.
Joshua N. Garick, with whom Law Offices of Joshua N. Garick, P.C., Andra Hutchins, and Kerstein, Coren & Lichtenstein LLP were on brief, for Tristan Squeri, Madeline McClain, and George O'Dea. Alice W. Yao and Daniel A. Zibel on brief for the National Student Legal Defense Network, amicus curiae. Katherine D. Shea and Pyle Rome Ehrenberg PC on brief for SEIU Local 509 and SEIU Local 888, amici curiae. Thomas R. Murphy and Law Offices of Thomas R. Murphy, LLC on brief for the Hildreth Institute, amicus curiae. Jeremy Sternberg, with whom Paul G. Lannon, Jr., John Monaghan, Christopher M. Iaquinto, and Holland & Knight LLP were on brief, for Mount Ida College, the Mount Ida College Board of Trustees, Carmin C. Reiss, Jeff Cutting, and Ron Akie. Elizabeth E. Olien, with whom Howard M. Cooper and Todd & Weld LLP were on brief, for Barry Brown. Tamsin R. Kaplan, with whom Emily P. Crowley and Davis, Malm & D'Agostine, P.C. were on brief, for Jason Potts. Ben Robbins and Martin J. Newhouse on brief for the New England Legal Foundation, amicus curiae.
March 25, 2020 LYNCH, Circuit Judge. In May 2018, Mount Ida College,
a higher education institution with its principal place of business
in Foxborough, Massachusetts, and its campus in Newton,
Massachusetts, permanently closed after six weeks' notice to its
students that it was closing. Mount Ida students in good academic
standing were offered admission to UMass Dartmouth to continue
their studies. Some students faced obstacles transferring their
credits, finding comparable degree programs, completing their
degrees on time, and receiving adequate scholarships and financial
aid. By the time of the notice of closing, the transfer deadlines
for many other institutions were imminent or had already passed.
Students Tristan Squeri and George O'Dea, and expected
student Madeline McClain, brought a putative class action under
Massachusetts law against Mount Ida, its Board of Trustees, and
five Mount Ida administrators: President Barry Brown; Chairwoman
of the Board of Trustees Carmin Reiss; Vice President, CFO, and
Treasurer Jason Potts; Dean of Admissions and Vice President of
Enrollment Management Jeff Cutting; and Chief Academic Officer and
Provost Ron Akie.
Underlying all the claims were allegations that the
defendants knew that Mount Ida was on the brink of insolvency but
concealed this information, instead assuring current and
prospective students that Mount Ida was financially stable. The
suit brought seven Massachusetts state law claims: breach of
- 3 - fiduciary duty, violation of privacy, fraud, negligent
misrepresentation, fraud in the inducement, breach of contract,
and violation of Massachusetts General Laws ch. 93A. The district
court granted the defendants' motion to dismiss the complaint.
See Squeri v. Mount Ida Coll., No. 18-12438, 2019 WL 2249722, at
*6 (D. Mass. May 24, 2019). We affirm.1
I.
A. Facts
We recite the facts as alleged in the plaintiffs'
complaint, accepting all well-pleaded facts as true and drawing
all reasonable inferences in favor of the non-moving party. Penate
v. Hanchett, 944 F.3d 358, 362 (1st Cir. 2019). On a motion to
dismiss, we may also consider "documents incorporated by reference
in [the complaint], matters of public record, and other matters
susceptible to judicial notice." Lydon v. Local 103, Int'l. Bhd.
of Elec. Workers, 770 F.3d 48, 53 (1st Cir. 2014) (alteration in
original) (quoting Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir.
2008)).
Mount Ida was established in 1899, enrolled in 2017 about
1300 students, and granted four-year bachelor's degrees as well as
1 We express appreciation for the amicus briefs from the Hildreth Institute, the National Student Legal Defense Network, SEIU Local 509 and SEIU Local 888, and the New England Legal Foundation.
- 4 - associate degrees and master's degrees. As early as 2014, Mount
Ida was in "financial distress" and "teetering on insolvency."
The defendants were aware of Mount Ida's financial position but
did not give direct notice of this to current or prospective
students.
Mount Ida filed annual audited financial statements with
the Massachusetts Attorney General's Office (AGO), as it was
required to do by Massachusetts law. See Mass. Gen. Laws ch. 12,
§ 8F. The financial statements filed with the AGO showed that
Mount Ida operated at a deficit of $543,511 in 2014, $6,024,258 in
2015, and $1,488,272 in 2016.2 Under Massachusetts law, these
filings must be publicly available. See id. § 8M ("[A]ll
registration statements, annual reports and all other information
required to be filed under [§§ 8 to 8M] . . . shall be public
records . . . and shall be open to the general public for
inspection at such time and under such conditions as the division
may prescribe."). These returns are available online from the
Massachusetts AGO. The audited return completed in 2017 for the
year 2016 was so filed and available online. Federal law also
requires nonprofits to file annual returns. See 26 U.S.C. § 6033.
Such information must be available for public inspection. See id.
§ 6104(b); 26 C.F.R. § 301.6104(d)-1.
2 The 2016 operating deficit was reduced due to an $8,114,300, one-time gift made to the school.
- 5 - In August 2017, Mount Ida submitted an Institutional
Self-Study to the New England Association of Schools and Colleges
(NEASC), its regional accreditation agency which is recognized by
the Department of Education under federal law. See 20 U.S.C.
§ 1099b. The Self-Study was not provided to students at Mount
Ida, but to NEASC. The report evaluated Mount Ida on NEASC's nine
standards for accreditation. In the Self-Study, the defendants
reported to NEASC that Mount Ida had experienced "significant
enrollment, program and aptitude growth," that pursuant to its
multi-year financial strategy Mount Ida would generate an
operating surplus in 2021, that Mount Ida was in full compliance
with its debt obligations, and that it was "confident that it will
raise sufficient funds to meet its liquidity needs."
The financial resources section of the document further
stated that "[f]rom June 30, 2012 through June 30, 2016, operating
revenues have increased from $35.8 million to $41.7 million while
operating expenses have increased from $35.3 million to $43.2
million." The report forecasted that Mount Ida would continue to
operate at a deficit until 2021, stating that "[b]ecause of many
years of deferral of physical maintenance, low enrollment and
failure of program expansion, the College's existing economic
model does not anticipate a surplus from core operations until FY
2021."
- 6 - On February 24, 2018, President Brown announced via
email a possible merger between Mount Ida and Lasell College to
the student body. The email stated that the purpose of the merger
"would be to create a more robust learning experience that would
take advantage of the distinctiveness of the programs, curricula
and experiences of each institution." The email did not mention
"that Mount Ida was in financial distress, that it was teetering
on insolvency, or that it was seriously contemplating bankruptcy."
On March 23, 2018, President Brown emailed the Mount Ida
student body announcing that Mount Ida and Lasell College had
"ended discussions on the previously announced exploration of
merger." The email further stated that "[o]ver the past six years,
Mount Ida has undergone extraordinary growth," and specifically
highlighted the increases in Mount Ida's enrollment, scholastic
aptitude, and programmatic offerings. The email then stated that
"[a]ll these gains have caused the national ratings of the
institution to rise to among the top 30 in the North Region as
reported in the US News and World Report Rankings." The email did
not mention Mount Ida's financial distress.
On April 6, 2018, President Brown again emailed the
Mount Ida student body and announced that "Mount Ida College has
reached an agreement with the University of Massachusetts . . .
under which UMass Amherst will acquire our Newton campus." The
email stated that "[w]hile this will mean that Mount Ida will end
- 7 - its role as an independent college, students in good academic
standing will be offered automatic acceptance into UMass
Dartmouth."
The announcement occurred without a closing plan having
been submitted earlier to the Massachusetts Department of Higher
Education (DHE). See 610 Mass. Code Regs. § 2.07(3)(f)(2)
(requiring an institution that "knows that it may close" to submit
a closing plan to DHE "as far as possible in advance of the closure"
and to "arrange . . . to safeguard the needs of students by
organizing educational transfer opportunities, and ensuring the
preservation of student records"). In the months leading up to
the April 6, 2018, announcement, Mount Ida "had been accepting new
students, offering substantial scholarships to new students, and
outwardly proceeding as usual to the beginning of a new fall term."
In the days following the announcement of closing,
students received individualized information packages about the
process for enrolling at UMass Dartmouth. The personalized
packages from UMass Dartmouth contained information about Mount
Ida students' majors, estimated credits, transcripts, and
financial aid packages. Mount Ida students had not given prior
consent to the defendants to release these records to UMass
Dartmouth.
- 8 - On April 27, 2018,3 Mount Ida provided written notice of
the sale to the AGO pursuant to Massachusetts General Laws ch. 180,
§ 8A(c), which requires a public charity intending to sell
substantially all of its property and assets to give thirty days'
notice to the AGO. Mount Ida told the AGO that the transaction
with UMass needed to close by May 16, 2018, or it would be unable
to meet its financial obligations and would file for bankruptcy.
The AGO responded by letter on May 15, 2018, agreeing to
waive the thirty-day prior notice requirement due to the exigency
of the circumstances. The AGO noted at the beginning of the letter
that the closing was "extremely unfair" to students as well as
"disorderly and harmful." The AGO letter then assessed and
approved the proposed sale and concluded that Mount Ida would be
receiving fair value in the transaction. As part of the
transaction, UMass Amherst would receive all of Mount Ida's real,
personal, and intellectual property in exchange for UMass Amherst
paying off Mount Ida's liabilities and providing Mount Ida with
funds to meet its obligations to faculty and staff. UMass Amherst
also agreed to continue Mount Ida's veterinary technology program
until its students completed the program and to provide other
schools with the necessary space and assets to continue the dental
3 It appears from the Massachusetts AGO's May 15, 2018, letter that the AGO became intensely involved with Mount Ida and its Board of Trustees following the April 6, 2018 announcement.
- 9 - hygiene, funeral services, interior architecture and design, and
fashion design programs.
UMass Dartmouth agreed to offer admission to all Mount
Ida students in good academic standing. All four UMass campuses
made commitments as part of the transaction: each campus agreed to
waive application and deposit fees for Mount Ida students, to
commit to ensuring that Mount Ida students understood how many
credits would transfer and count toward degree requirements, to
accept Mount Ida general education courses toward fulfilling UMass
general education requirements, to charge in-state tuition to all
Mount Ida students who were citizens or permanent U.S. residents,
and to ensure that the financial aid packages of Mount Ida students
would not be adversely affected by late applications or
enrollments. UMass Amherst agreed to become the "institution of
record" for Mount Ida's student records.
On May 16, 2018, Mount Ida and UMass Amherst finalized
the sale. Mount Ida officially closed the following day. About
250 Mount Ida students transferred to UMass Dartmouth out of 1389
total students. Other students faced obstacles transferring to
new institutions given the short period of notice of Mount Ida's
closing. As said, some students faced difficulties finding similar
programs, transferring their credits, completing their chosen
- 10 - degrees on time, and receiving comparable financial aid and
scholarships.4
B. Procedural History of the Litigation
The plaintiffs filed this lawsuit in federal district
court on November 26, 2018, asserting jurisdiction under the Class
Action Fairness Act, 28 U.S.C. § 1332(d), and amended their
complaint on January 5, 2019, to assert the seven theories
described earlier. After briefing and oral argument, on May 24,
2019, the district court in a sixteen-page written opinion
dismissed the complaint. See Squeri, 2019 WL 2249722, at *6.
The amended complaint first alleged that the defendants
violated the plaintiffs' right to privacy under Massachusetts
General Laws ch. 214, § 1B by transferring the plaintiffs' private
financial and academic information to UMass Dartmouth without the
students' consent. The district court held that as a matter of
law the plaintiffs had failed to allege that the disclosure was
4 The AGO sent a letter to the Commissioner of the Massachusetts DHE, but showed no copy to Mount Ida, on March 13, 2019. The letter included findings from the AGO's investigation of Mount Ida and recommendations for the DHE on steps it could take to protect students in the future. The recommendations included "[i]nforming trustees and officers of nonprofit higher education institutions about their obligations," ensuring institutions prepare necessary contingency plans, ensuring notification to students when the risk of closing is sufficiently imminent, monitoring institutions relying on "nontraditional or extraordinary transactions" to address budget deficits, and increasing the awareness of higher education consultants of the factors placing educational institutions at risk.
- 11 - unreasonable because Mount Ida transferred the records to
facilitate the plaintiffs' enrollment at UMass Dartmouth, which
was a "legitimate purpose." Further, the transfer was in
accordance with both the AGO's May 15, 2018, letter and
Massachusetts regulations, 610 Mass. Code Regs. § 2.07(3)(f)(2).
As to the fraud, negligent misrepresentation, and fraud
in the inducement claims, asserted in counts two, three, and four,
the amended complaint alleged that the defendants had held Mount
Ida out as a "viable institution" despite the fact that they knew
or should have known that it was failing financially. The
complaint cited the facts that up until Mount Ida's closing, the
college accepted new students, sought enrollment deposits for the
fall 2018 entering class, advertised and awarded substantial
scholarships, scheduled admitted student days, omitted information
about the Lasell merger from the 2017 Self-Study report, and failed
to inform the DHE of its financial distress. The complaint also
stated that the statement in the March 23, 2018, email about the
rating of Mount Ida by US News and World Reports was a
misrepresentation. The plaintiffs alleged that they relied to
their detriment on these representations.
The district court concluded that these claims also
failed as a matter of law because the plaintiffs had not identified
"any statement that can be shown to have actually been false" and
failed to make out a claim of fraud by omission because Mount Ida's
- 12 - audited financial information was publicly available. Even
assuming the defendants had concealed material information, the
court held the plaintiffs failed to allege that the defendants had
an actionable duty to disclose such information as needed to
support these tort claims.
As for the claim of breach of fiduciary duty, the amended
complaint alleged that the defendants "held a unique position of
influence and trust with [the] students" and so owed the students
a fiduciary duty and were in breach of this duty by "[f]ailing to
apprise the [plaintiffs] in a timely manner of the financial
viability of Mount Ida, . . . [e]ngaging in the sale of the Newton
campus without first providing for the needs of the students,
. . . [d]ivulging, without authorization, [their] sensitive and
private financial and academic information, . . . [r]ejecting a
merger deal with Lasell College[,] . . . and [p]lacing Mount Ida’s
needs ahead of the needs of the [plaintiffs]."
The district court held that this claim failed as a
matter of law because "Massachusetts courts have consistently held
that no fiduciary relationship exists between a student and his or
her college." Any fiduciary duty owed by the defendants, the
district court reasoned, "was owed to Mount Ida as a corporate
entity."
On the breach of contract claim, the amended complaint
alleged that the plaintiffs had formed a contract with Mount Ida
- 13 - (without specifying how) and that the plaintiffs "fulfilled their
contractual obligations to Mount Ida by remitting tuition payments
. . . for the purpose of receiving a degree in their selected
field." The amended complaint asserted that the defendants
"breached their contractual duty by failing to provide the
education bargained for and paid for by the [p]laintiffs."
The district court concluded that these "bare
allegations [did] not suffice for a breach of contract claim"
because the complaint failed to identify the terms of the
"contract, when it was formed, and who negotiated it." Further,
the amended complaint failed to plausibly allege an implied
contract.
Finally, the amended complaint alleged that the
defendants violated Massachusetts General Laws ch. 93A, § 9,
alleging that the defendants were engaged in "trade [or] commerce"
as required for a ch. 93A claim because: (1) Mount Ida competed
with other schools for the enrollment of students by offering
scholarships, advertising the school, holding admitted student
days, and selling promotional merchandise; (2) it offered for sale
a unique product to students; and (3) it received a financial
benefit from students.
The district court concluded that this claim failed
because the defendants were not engaged in "trade or commerce."
Rather, the actions they took were in furtherance of, or at least
- 14 - incidental to, Mount Ida's core educational mission and so, under
state law, ch. 93A did not apply.
II.
"We review the grant of a motion to dismiss de novo."
See Starr Surplus Lines Ins. Co. v. Mountaire Farms Inc., 920 F.3d
111, 114 (1st Cir. 2019). To overcome a motion to dismiss, the
plaintiffs' complaint "must contain sufficient factual
matter . . . to state a claim to relief that is plausible on its
face." Saldivar v. Racine, 818 F.3d 14, 18 (1st Cir. 2016)
(alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)) (internal quotation marks omitted). "If the factual
allegations in the complaint are too meager, vague, or conclusory
to remove the possibility of relief from the realm of mere
conjecture, the complaint is open to dismissal." Barchock v. CVS
Health Corp., 886 F.3d 43, 48 (1st Cir. 2018) (quoting SEC v.
Tambone, 597 F.3d 436, 442 (1st Cir. 2010)). We apply
Massachusetts substantive law. Katz v. Pershing, LLC, 672 F.3d
64, 72 (1st Cir. 2012).
III.
We dispose of the preliminary issues first, before
turning to the merits of the state law claims.
The district court did not err in referring to public
records or documents referenced in the complaint, including the
Massachusetts AGO May 15, 2018, letter, Mount Ida's financial
- 15 - statements, and other NEASC reports.5 The court may consider
"official public records . . . [and] documents sufficiently
referred to in the complaint." Freeman v. Town of Hudson, 714
F.3d 29, 36 (1st Cir. 2013).
The amended complaint specifically referenced the August
2017 Self-Study report submitted to NEASC multiple times and cited
it in support of the fraud and misrepresentation claims. Further,
both the Massachusetts AGO's May 15 and March 13 letters, as well
as Mount Ida's publicly filed audited financial documents required
by state law, constitute public records.6 The two letters were
written by the AGO itself while the financial documents were
audited and submitted to the AGO pursuant to a statutory duty and
made available to the public.
Likewise, the plaintiffs argue that there are material
disputes of fact as to at least some claims which survive
dismissal. Not so. The district court correctly applied Iqbal's
plausibility standard and took the facts as pleaded by the
5 The plaintiffs are incorrect in contending that the district court applied the wrong rule. The district court expressly stated that "[d]espite plaintiffs' objection, the court may consider [the AGO] letter, along with Mount Ida's financial statements and the NEASC reports, because they are public records or are referenced in the Amended Complaint." 6 We need not decide if NEASC reports are "public records" because we reach the same conclusion without considering the NEASC reports that were not referenced in the complaint.
- 16 - plaintiffs and found no claims were stated as a matter of law. We
add that we see no disputes as to any material facts.
IV.
A. The Breach of Fiduciary Duty Claim Fails
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 *3 (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
B. No Claim of Violation of Privacy Was Stated
Next, the plaintiffs argue that the district court erred
in dismissing their violation of privacy claim under ch. 214, § 1B.
They argue that the issue of whether the records transfer was
"reasonable" because it had a "legitimate purpose" is a question
of fact that should have gone to a jury. They rely on a distinction
between UMass Amherst and UMass Dartmouth and argue that UMass
Dartmouth could not have received the records pursuant to a
"closing plan" or at the AGO's direction because it received the
10 We reject any argument that the plaintiffs lack Article III standing. It is clear that the plaintiffs have sufficiently alleged injury to have Article III standing.
- 22 - records before the AGO coordinated a plan for Mount Ida's closing.
Further, UMass Dartmouth was not the eventual successor
"institution of record" for Mount Ida; rather, UMass Amherst
fulfilled this role. Neither argument has merit.
"To sustain a claim for invasion of privacy [under
G.L. c. 214, § 1B], the invasion must be both unreasonable and
substantial or serious." Ortiz v. Examworks, Inc., 26 N.E.3d 165,
173 (Mass. 2015) (alteration in original) (quoting Nelson v. Salem
State Coll., 845 N.E.2d 338, 348 (Mass. 2006)). While
"[g]enerally, whether an intrusion qualifies as unreasonable, as
well as either substantial or serious, presents a question of
fact," Polay v. McMahon, 10 N.E.3d 1122, 1126 (Mass. 2014), the
SJC has made clear that such claims may be dismissed if they fail
to allege an actionable interference with privacy, see Ortiz, 26
N.E.3d at 173.
In Ortiz, the SJC affirmed the dismissal of the
plaintiff's § 1B claim against the defendant-physician because
another Massachusetts statute had authorized the defendant to
perform the medical examination that the plaintiff had claimed
violated his privacy. Id. at 173-74. The SJC cited Schlesinger
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 567 N.E.2d 912,
915 (Mass. 1991), for the proposition that an "action [is] not [a]
'serious' or 'substantial' interference with privacy if, among
other things, it had a legitimate business purpose." Ortiz, 26
- 23 - N.E.3d at 173-74. The SJC concluded that "[b]ecause the
examination was authorized under [the statute] the invasions of
privacy associated with its taking place were 'justified.'" Id.
at 174 (quoting Schlesinger, 567 N.E.2d at 914-15).
Here, the plaintiffs' own allegations establish there
was a legitimate business purpose. As in Ortiz, the transfer of
financial and academic information was "justified" because it was
authorized under Massachusetts law. See 610 Mass. Code Regs.
§ 2.07(3)(f)(2). Massachusetts regulations require a closing
institution "to safeguard the needs of students by organizing
educational transfer opportunities, and ensuring the preservation
of student records." Id. That purpose did not depend on there
being a final closing plan in place. The transfer's purpose was
to enable Mount Ida students to continue their educations at UMass
and to preserve their student records.
We also reject the plaintiffs' argument that only UMass
Amherst, not UMass Dartmouth, could receive their records. The
University of Massachusetts is a state system with five campuses,
and not a set of independent colleges. See Mass. Gen. Laws ch. 75,
§ 1 ("There shall be a University of Massachusetts, consisting of
campuses to be maintained at Amherst, Boston, Dartmouth, Lowell,
and Worcester, which shall continue as a public institution of
higher learning . . . .").
- 24 - C. No Claims Were Stated for Fraud, Negligent Misrepresentation, or Fraud in the Inducement
The plaintiffs challenge the dismissal of their fraud
and misrepresentation claims, arguing that the defendants made
"false and misleading statements" and committed fraud by omission
by failing to disclose Mount Ida's financial distress.11
For a claim of fraud, a plaintiff, among other
requirements, "must establish that the defendant 'made a false
representation of a material fact with knowledge of its falsity.'"
Russell v. Cooley Dickinson Hosp., Inc., 772 N.E.2d 1054, 1066
(Mass. 2002) (quoting Danca v. Taunton Sav. Bank, 429 N.E.2d 1129,
1133 (Mass. 1982)). Negligent misrepresentation does not require
that the defendant have "an intent to deceive or actual knowledge
that a statement is false;" instead, it only requires that the
defendant fail to exercise "reasonable care or competence in
obtaining or communicating the information." Cumis Ins. Soc'y,
Inc. v. BJ's Wholesale Club, Inc., 918 N.E.2d 36, 47-48 (Mass.
2009) (quoting Nycal Corp. v. KPMG Peat Marwick LLP., 688 N.E.2d
1368, 1371 (Mass. 1998)).
The plaintiffs have failed to plead any false statement
made by any of the defendants. They assert that the March 23,
2018, email announcing the end of the Lasell merger talks was false
11 Like the district court, we do not reach the issue of whether the plaintiffs' fraud claims were subject to and met the requirements of Federal Rule of Civil Procedure 9(b).
- 25 - because President Brown "announced that Mount Ida would remain a
top 30 regional school." But contrary to the plaintiffs'
characterization, President Brown's email actually stated that
Mount Ida's gains over the past six years in enrollment and
programmatic offerings had "caused the national ratings of the
institution to rise to among the top 30 in the North Region as
reported in the US News and World Report Rankings." This statement
was not false. The statement was about a past rating.
Additionally, none of the plaintiffs allege they relied on
statements made by Brown between the March 23, 2018, email and the
closing announcement two weeks later. Further, the plaintiffs
point to no other statements by any of the defendants that were
allegedly false.
The plaintiffs' argument that their negligent
misrepresentation claim does not fail lacks merit. Negligent
misrepresentation still requires a false statement by the
defendants. Id. at 48.
The plaintiffs have also failed to plausibly allege
fraud by omission. The plaintiffs allege that despite "facing
imminent failure, the defendants were variably touting the
college's viability to current and prospective students." "Fraud
by omission requires both concealment of material information and
a duty requiring disclosure." Sahin v. Sahin, 758 N.E.2d 132, 138
n.9 (Mass. 2001). Further, "[f]ragmentary information may be as
- 26 - misleading as active misrepresentation, and half-truths may be as
actionable as whole lies." Kannavos v. Annino, 247 N.E.2d 708,
711-12 (Mass. 1969).
But here there were no half-truths, nor was there a duty
to disclose. The plaintiffs have not identified any statements by
the defendants about Mount Ida's financial situation that could be
construed as half-truths. In Mount Ida's audited financial
information, the defendants accurately reported that Mount Ida had
operated at a deficit in 2014, 2015, and 2016. Further, President
Brown's statement about Mount Ida's ranking was not forward-
looking, and only reported a fact about Mount Ida's current
standing.12
Further, the plaintiffs have failed to plausibly allege
that any of the defendants had a duty to disclose this information.
They rely on Knapp v. Neptune Tower Associates, 892 N.E.2d 820
(Mass. App. Ct. 2008), which stated that a duty to disclose arises
where "(i) there is a fiduciary or other similar relation of trust
and confidence, (ii) there are matters known to the speaker that
he knows to be necessary to prevent his partial or ambiguous
statement of the facts from being misleading, or (iii) the
nondisclosed fact is basic to, or goes to the essence of, the
12 Further, the 2017 Self-Study, which was directed at NEASC and was not a statement to students, stated that Mount Ida had been operating at a deficit and would continue to do so until 2021.
- 27 - transaction." Id. at 824. As said, there was no fiduciary duty
here. Further, none of the defendants made a "partial or
ambiguous" statement about Mount Ida's finances. Finally, Mount
Ida's financial distress did not go to the essence of the
transaction. Here, the essence of the transaction with the
students was that the students would receive a semester of
education in exchange for a semester of tuition. Mount Ida's
financial distress did not impact this transaction, as the students
did receive a semester of education before the school closed.
D. No Breach of Contract Claim Was Pleaded
The plaintiffs assert that the district court erred
because they plausibly "pled a breach of either the implied or
express contractual agreements between the students and the
college."13
Under Massachusetts law, the elements of a breach of
contract claim are that "there was an agreement between the
parties; the agreement was supported by consideration; the
plaintiff was ready, willing, and able to perform his or her part
of the contract; the defendant committed a breach of the contract;
and the plaintiff suffered harm as a result." Bulwer v. Mount
13We reject the plaintiffs' assertion that the district court applied the wrong pleading standard by stating that the plaintiffs' contract claim failed for "lack of specificity." The district court correctly laid out the plausibility standard at the beginning of its decision and was simply stating that the amended complaint failed to allege any specific details about the claim.
- 28 - Auburn Hosp., 46 N.E.3d 24, 39 (Mass. 2016). Further, "[i]n the
absence of an express agreement, a contract implied in fact may be
found to exist from the conduct and relations of the parties."
Sullivan v. O'Connor, 961 N.E.2d 143, 153 (Mass. App. Ct. 2012)
(quoting LiDonni, Inc. v. Hart, 246 N.E.2d 446, 449 (Mass. 1969)).
"[I]t is essential to state with 'substantial certainty' the facts
showing the existence of the contract and the legal effect
thereof." Tel. Answering Serv. of Bos., Inc. v. New Eng. Tel. &
Tel. Co., 267 N.E.2d 918, 919 (Mass. 1971) (quoting Pollock v. New
Eng. Tel. & Tel. Co., 194 N.E. 133, 136 (Mass. 1935)).
The plaintiffs' contract pleadings were that they
"applied for admission to Mount Ida," they were each accepted, and
that "a contract was formed." It does not allege the terms of any
such contract or that specific terms required earlier disclosure
of the closing. The amended complaint also makes passing reference
to enrollment deposits and the fact that students gave up the
chance to enroll at other schools by choosing Mount Ida but fails
to explain how these actions formed an express or implied contract
which obliged Mount Ida to provide earlier notice of its
difficulties to its students than it did. We agree that there was
insufficient specificity. And there is no dispute that Mount Ida
delivered a semester of education before it closed, if those were
the terms of any contract. These allegations do not plausibly
allege a breach of implied contract, let alone an express contract,
- 29 - that the college contracted to give earlier notice than it did or
that there was a contract for four years of education in exchange
for only one semester of tuition.14
E. The Chapter 93A Violation Claim Was Properly Dismissed
Finally, the plaintiffs argue that the district court
erred in concluding that the allegedly deceptive actions the
defendants took were in service of Mount Ida's core educational
mission and so were not in "trade or commerce," as required by
ch. 93A, § 2(a). They assert that a "factual inquiry" is required
to resolve such a claim and that the district court "cannot conduct
such a detailed factual inquiry during the . . . motion to dismiss
stage."
Chapter 93A makes unlawful "[u]nfair methods of
competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce." Mass. Gen. Laws ch. 93A,
§ 2(a). It is well established law that while "[a]n entity's
'status as a charitable corporation is not . . . dispositive of
the issue whether ch. 93A applies[,]' . . . [i]n most
14 The plaintiffs also assert that the defendants breached the implied duty of good faith and fair dealing. The plaintiffs' conclusory allegations also fail to state such a claim. See A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transp. Auth., 95 N.E.3d 547, 561 (Mass. 2018) ("Simply put, 'the implied covenant of good faith and fair dealing cannot create rights and duties that are not already present in the contractual relationship.'" (quoting Eigerman v. Putnam Invs., Inc., 877 N.E.2d 1258, 1265 (Mass. 2007))).
- 30 - circumstances, a charitable institution will not be engaged in
trade or commerce when it undertakes activities in furtherance of
its core mission." Linkage Corp. v. Trs. of Bos. Univ., 679 N.E.2d
191, 207-09 (Mass. 1997) (quoting Planned Parenthood Fed'n of Am.
v. Problem Pregnancy of Worcester, Inc., 498 N.E.2d 1044, 1051
(Mass. 1986)). Such claims may properly be dismissed for failing
plausibly to allege that the defendant is engaged in trade or
commerce. See Poznik v. Mass. Med. Prof. Ins. Ass'n, 628 N.E.2d
1, 3-4 (Mass. 1994).
Indeed, the Linkage court stressed the broad meaning of
the term education, as distinguished from "trade or commerce" in
footnote thirty-six:
We have given broad meaning to the term "education" in order to implement legislative goals and to allow education reasonable freedom to develop, and we have held that vocational and technical teaching and courses constitute education. See, e.g., Assessors of Bos. v. Garland Sch. of Home Making, 6 N.E.2d 374, 386 (Mass. 1937) (instruction in homemaking skills is educational); Mount Hermon Boys' Sch. v. Gill, 13 N.E. 354, 358 (Mass. 1887) (for purposes of statute exempting educational property from taxation, education includes teaching practical skills). As Justice Knowlton phrased the concept of education, "according to one of Webster's definitions," in the Mount Hermon decision, "[t]o educate . . . is to prepare and fit for any calling or business, or for activity and usefulness in life." Id. at 357.
Linkage, 679 N.E.2d at 208 n.36 (alterations in original) (internal
quotation marks omitted).
- 31 - This case does not fall within the exception to the
normal rule recognized in Linkage. Linkage was a suit not brought
by students at BU complaining about their education, and that fact
alone makes Linkage distinguishable. Id. at 195. Rather the suit
was brought by a private commercial company that had a contract to
run an offsite training program at a conference center with BU,
which was alleged to have been wrongfully terminated by BU. Id.
at 195-96. The SJC held the jury had adequate evidence to find a
breach of contract and that BU had benefitted from transactions
done on its behalf by Linkage and could not therefore repudiate
the contract. Id. at 202-05. It also upheld the trial judge's
conclusion that ch. 93A, § 11 applied because the two parties'
transaction was "of a commercial nature" and the parties were
acting in a business context and BU was engaged in "trade or
commerce" in its operation of the conference center. Id. at 207-
08.
The SJC was careful to distinguish the BU facts from
situations in which the defendant is, as here, a "statutorily
mandated nonprofit" whose actions were "motivated by legislative
mandate [and] not [for] business or personal reasons." Id. at 208
(quoting Poznik, 628 N.E.2d at 4). The factors considered by the
SJC as to business context are as follows:
The question whether a transaction occurs in a business context must be determined by the facts of each case. Begelfer v. Najarian, 409
- 32 - N.E.2d 167, 176 (Mass. 1980). The factors we consider include "the nature of the transaction, the character of the parties and their activities, and whether the transaction was motivated by business or personal reasons." All Seasons Servs., Inc. v. Comm'r of Health & Hosps. of Bos., 620 N.E.2d 778, 779 (Mass. 1993).
Poznik, 628 N.E.2d at 3. None of these factors permit a finding
of business context here.
Certainly, the words "trade" and "commerce" in ch. 93A,
§ 1(b) do not traditionally mean the provision of education to
students at a not-for-profit college. See Planned Parenthood, 498
N.E.2d at 1052.
The plaintiffs argue that the defendants violated
ch. 93A by failing to follow through on the Lasell merger, failing
to disclose Mount Ida's financial distress, and by transferring
their financial and academic information to UMass Dartmouth. But
what the plaintiffs allege to be actionable were all activities
taken in furtherance of Mount Ida's charitable mission of
education.15 Unlike in Linkage where BU possessed a "business
motivation[]" to create a new revenue stream with a business
partner, 679 N.E.2d at 209, Mount Ida's allegedly actionable
activities involved directly encouraging students to attend Mount
15The fact that Mount Ida may sell a small amount of merchandise with the school's name is distinct from the question here of whether statements directly related to attracting students are actionable under ch. 93A.
- 33 - Ida so that they could receive an education and ensuring that Mount
Ida students could continue their educations after Mount Ida's
closing.
The plaintiffs' argument that the phrase "advertising
. . . of any services" in the text of ch. 93A, § 1(b) means that
they state a ch. 93A claim as to services provided by a not-for-
profit has been squarely rejected by the SJC. See Planned
Parenthood, 498 N.E.2d at 1050-51 (determining that a charitable
corporation, which had engaged in advertising of its services, was
not engaged in trade or commerce).
It is true that the BHE regulations, 610 Mass. Code Regs.
§ 2.07(3)(g)(2), state that "[t]he educational institution shall
not engage in untrue and misleading advertisements which are
otherwise prohibited by [ch. 93A]." But the plaintiffs do not and
could not argue this regulation adds to the requirements of ch. 93A
as set forth by the legislature and the courts.
And there is even stronger reason to conclude that
Massachusetts has not authorized a private right of action under
ch. 93A for these types of actions by a nonprofit school.
Regulation of not-for-profit colleges as to such matters as timing
of notice of closing has been assigned to the Massachusetts BHE.
See Mass. Gen. Laws ch. 69, § 30A; see also 610 Mass. Code Regs.
§§ 2.01-2.14.
- 34 - V.
Since our decision disposes of the claims against all of
the defendants, including the individual defendants and the Board of
Trustees, we do not reach the other defenses that they have raised.16
We also reject the plaintiffs' request for leave to amend.
The "plaintiffs were put on notice of the deficiencies in the
complaint by the motion to dismiss. If they had something relevant
to add, they should have moved to add it then." Fire & Police Pension
Ass'n of Colo. v. Abiomed, Inc., 778 F.3d 228, 247 (1st Cir. 2015).
They failed to do so. Instead, they stated only that they requested
leave to amend if the court found their complaint lacking. This was
insufficient. See Gray v. Evercore Restructuring L.L.C., 544 F.3d
320, 327 (1st Cir. 2008) (concluding that a similar statement "[did]
not constitute a motion to amend a complaint" and "the district court
cannot be faulted for failing to grant such leave sua sponte").17
Affirmed.
16 To the extent that certain defendants argue that they are volunteers serving a not-for-profit organization entitled to the protections of the Volunteer Protection Act, 42 U.S.C. § 14503(a), we note the recent holding by the SJC that the Volunteer Protection Act provides immunity from suit, not merely immunity from liability. Lynch v. Crawford, 135 N.E.3d 1037, 1041 (Mass. 2019). 17 The defendants' request for sanctions against the plaintiffs is denied.
- 35 -