United States Court of Appeals For the First Circuit No. 20-1878
ANNIE ZHAO, individually and on behalf of all others similarly situated,
Plaintiff, Appellant,
v.
CIEE INC.; COUNCIL ON INTERNATIONAL EDUCATION EXCHANGE, INC.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. Lance E. Walker, U.S. District Judge]
Before
Howard, Chief Judge, Thompson, Circuit Judge and Arias-Marxuach, District Judge.
Sigmund D. Schutz, with whom Gregory P. Hansel, Randall B. Weill, Alexandra A. Harriman, Preti, Flaherty, Beliveau & Pachios, LLP, Joshua Fields and Kirtland & Packard LLP were on brief, for appellant. Chad W. Higgins, with whom Robert J. Keach, Patrick I. Marass, Zack B. Brandwein and Bernstein, Shur, Sawyer and Nelson, P.A., were on brief, for appellees.
June 28, 2021
Of the District of Puerto Rico, sitting by designation. Arias, District Judge. Appellant Annie Zhao was
studying abroad in the Netherlands in March 2020 when the COVID-
19 pandemic upended daily life. In response to the pandemic,
Appellees CIEE, Inc. and the Council on International Educational
Exchange, Inc. (collectively, "CIEE"), Zhao's study abroad
provider, cancelled the abroad portion of her program and made
alternative arrangements for her to complete her coursework
online. On appeal, Zhao does not question the wisdom of cancelling
this portion of her study abroad program. Nor does she question
the alternative arrangements made by CIEE to allow her to complete
her course work online. Instead, she questions the district
court's decision to dismiss, for failure to state a claim, her
complaint against CIEE for breach of contract because the company
refused to provide a refund in lieu of experiences, excursions,
activities, and services she would have otherwise enjoyed abroad
absent the pandemic.1 The district court construed the contract
to give effect to all its provisions and concluded no refund was
due when the cancellation of a program occurs after it started. We
affirm.
Background
Zhao, a member of the Harvard College Class of 2021,
1 The district court also dismissed Zhao's claim for unjust enrichment. Because she has not raised that issue on appeal, we consider it waived. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990). - 2 - paid CIEE for a Spring 2020 study abroad program at the University
of Amsterdam in the Netherlands. Prior to the program's start in
late January 2020, Zhao and other similarly situated participants
signed the CIEE Program Participant Contract and Forum Methodology
for Dispute Resolution Agreement ("Participant Contract"), which
included the CIEE Terms and Conditions ("Terms and Conditions").
On March 11, 2020, the World Health Organization declared COVID-
19 a pandemic and the United States Centers for Disease Control
issued a Level 3 travel warning for Europe and Level 2 global
travel advisory, and the United States Department of State issued
a Level 3 global travel advisory. On March 12, 2020, CIEE notified
the program participants of its plans to suspend the abroad portion
of their study abroad programs and on March 15, 2020, it acted
accordingly. To ensure that participants could still earn academic
credit, CIEE migrated its on-site programs to online and distance-
learning classes. Zhao completed her program coursework online.
Although initially equivocating about whether Zhao would receive
any refund, CIEE ultimately did not provide her with one and
instituted a no-refund policy for most students on April 1, 2020.
On June 11, 2020, on her behalf and of those similarly
situated, Zhao sued CIEE in Maine Superior Court alleging that in
cancelling their program, CIEE breached its contractual duty to
them. Zhao claimed they had a right to a refund for services not
provided by CIEE because Paragraph 14 of the Participant Contract
- 3 - 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." On July 6, 2020, CIEE removed the case to federal
district court and filed a Motion to Dismiss, arguing that other
clauses in the Participant Contract and Terms and Conditions
exempted them from issuing refunds to participants.
On August 31, 2020, the district court granted the
motion. It agreed with CIEE that other provisions of the
Participant Contract and Terms and Conditions limited CIEE's
contractual obligations to the participants, including Zhao, and
dismissed the complaint. See Zhao v. CIEE, Inc., No. 2:20-cv-
00240-LEW, 2020 WL 5171438, at *4 (D. Me. 2020).
Standard of Review
We review de novo a district court's order granting a
motion to dismiss under Fed. R. Civ. P. 12(b)(6). See Newton
Covenant Church v. Great Am. Ins. Co., 956 F.3d 32, 34 (1st Cir.
2020); see also Riggs v. Curran, 863 F.3d 6, 10 (1st Cir. 2017)
("In conducting this review, we accept the truth of all well-
pleaded facts and draw all reasonable inferences therefrom in the
pleader's favor.") (quotation omitted). As part of this review,
we consider the complaint's well-pleaded allegations and
"documents sufficiently referred to" therein. Giragosian v.
Bettencourt, 614 F.3d 25, 28 (1st Cir. 2010) (quotation omitted).
- 4 - However, we "reject unsupported conclusions or interpretations of
law." Dixon v. Shamrock Fin. Corp., 522 F.3d 76, 79 (1st Cir.
2008) (internal quotation marks omitted).
The Participant Contract Absolves CIEE of Zhao's Refund Claim
Under Maine law, the elements of a breach of contract
claim are: "(1) breach of a material contract term; (2) causation;
and (3) damages."2 Wetmore v. MacDonald, Page, Schatz, Fletcher &
Co., LLC, 476 F.3d 1, 3 (1st Cir. 2007) (quotation and emphasis
omitted). "When interpreting a contract, a court needs to look at
the whole instrument." Me. Woods Pellet Co., LLC v. W. World Ins.
Co., 401 F. Supp. 3d 194, 200 (D. Me. 2019), reconsideration
denied, 2020 WL 3404728 (D. Me. 2020) (quoting Am. Prot. Ins. Co.
v. Acadia Ins. Co., 814 A.2d 989, 993 (Me. 2013) (alteration
omitted)). The whole instrument here refers to the Participant
Contract as well as to the included Terms and Conditions, both of
which Zhao signed. See Crowe v. Bolduc, 334 F.3d 124, 137 (1st
Cir. 2003) (quoting Hilltop Cmty. Sports Ctr., Inc. v. Hoffman,
755 A.2d 1058, 1062 (Me. 2000)).3
2 The parties agree that the contract is to be interpreted according to Maine law.
3 Neither party argues that the Participant Contract and Terms and Conditions are separate contracts and the district court read the Participant Contract to include the Terms and Conditions. We pause to note that the Participant Contract (as far as the record shows) does not explicitly incorporate the Terms and Conditions by reference. However, the Terms and Conditions note that the "Participant Contract . . ., inclusive of these Terms [and] - 5 - Further, courts will "interpret a contract according to
the plain meaning of its language, and will avoid any
interpretation that renders a provision meaningless." Me. Woods
Pellet Co., LLC, 401 F. Supp. 3d at 200 (quoting Richardson v.
Winthrop Sch. Dep't, 983 A.2d 400, 403 (Me. 2009)). The
interpretation of contractual language "is a matter of law for the
court to decide." Fowler v. Boise Cascade Corp., 948 F.2d 49, 54
(1st Cir. 1991) (citing Portland Valve, Inc. v. Rockwood Sys.
Corp., 460 A.2d 1383, 1387 (Me. 1983)). If the language is
unambiguous, then, under Maine law, the judge can interpret the
contract as a matter of law to see if a breach occurred. See Am.
Prot. Ins. Co., 814 A.2d at 993 (quoting Acadia Ins. Co. v. Buck
Constr. Co., 756 A.2d 515, 517 (Me. 2000)). Whereas if the court
finds the contractual language to be ambiguous, then "its
interpretation is a question of fact for the factfinder." Id.
Recall that Paragraph 14 of the Participant 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
Conditions," is the controlling document for interpreting program policies. See Crowe, 334 F.3d at 137 ("[I]n the absence of anything to indicate a contrary intention, instruments executed at the same time, by the same contracting parties, for the same purposes, and in the course of the same transaction will be considered and construed together.") (quoting Hilltop Cmty. Sports Ctr., Inc., 755 A.2d at 1062). - 6 - participant." While Paragraph 14 explains when a refund may be
issued due to program cancellation, the Terms and Conditions also
contain a section addressing program cancellation. The first
paragraph of the "Program Cancellation" section of the Terms and
Conditions provides for refunds in the event a program is canceled
prior to its start:
CIEE reserves the right to cancel a CIEE Study Abroad program due to insufficient enrollment or other factors beyond its control. . . . In the unlikely event that a program is canceled prior to the start of the program, due to low enrollment or any other reason, CIEE will refund all payments received but will have no further liability to participant.
(Emphasis added.)
The second paragraph of that same section sets out CIEE's
obligations when an emergency requires cancellation of a program
after its start and prior to the end of an academic term:
If an emergency requires that a program be canceled following the program start date and prior to the end of an academic term, CIEE will make reasonable efforts to make alternative arrangements in order to allow students to complete their academic work, but cannot guarantee that full or partial credit will be obtained. If alternative arrangements cannot be made, CIEE will make reasonable efforts to collect documentation of student work completed to date. CIEE will share this information with the home institutions of students enrolled in the program so they will be able to evaluate, per home institution policies, whether to grant their students any, full, or partial credit for work completed.
(Emphasis added.) - 7 - Lastly, the Terms and Conditions provide that "in the
case of conflict among . . . [CIEE's] policies," the Participant
Contract, "inclusive of these Terms & Conditions, first applies.
It is the sole responsibility of the student to become familiar
with all CIEE and host institution policies."
Zhao bases her breach of contract claim on the fact that
CIEE failed to fulfill its obligation to offer a study abroad
experience to participants and, instead, migrated its programs
into an online platform of lesser quality and without the true
abroad experience including activities and excursions. She claims
that under Paragraph 14 she and similarly situated students have
an unambiguous right to receive compensation, in the form of a
refund, 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.4
CIEE contends the district court correctly applied basic
rules of contract interpretation to find the Participant Contract
unambiguous. Hence, it properly looked to the Participant
4 Zhao also quibbles with some language from the district court opinion saying that her claim for refunds "rises and falls" upon the interpretation of Paragraph 14. She points out that even absent that provision she could have plead breach of contract for CIEE's failure to provide educational services as it promised. True or not, the district court was merely saying that Zhao's claim depends on how the court reads Paragraph 14, not that Zhao needed a refund provision to state a claim. We move on.
- 8 - Contract's whole context and structure rather than reading
Paragraph 14 in isolation. CIEE also claims that by signing the
Participant Contract, inclusive of the Program Cancellation
section of the Terms and Conditions, Zhao and other participants
agreed to the modification of the study abroad program after its
start date without any refund provision. To CIEE, the absence of
a refund provision in the Program Cancellation section's second
paragraph "unambiguously demonstrates that the parties did not
intend for CIEE to provide a refund if a program is cancelled after
its start date." After a de novo review of the district court
decision and record, we agree.5
We start, as we always do, with the contract's plain
language, which, remember, we interpret as a question of law. See
Crowe, 334 F.3d at 136. A contractual provision in Maine is
"considered ambiguous if it is reasonably possible" that the
"provision [has] at least two different meanings." Id. at 135
(quoting Villas by the Sea Owners Ass'n v. Garrity, 748 A.2d 457,
461 (Me. 2000)). We conduct this review for ambiguity from the
"perspective of 'an ordinary or average person.'" Id. (quoting
5 In CIEE's brief and at oral argument, the company explained the practicalities of the no-refund provision. CIEE called itself a "pass through organization," which had prearranged payments to independent contractors for providing housing, transportation, food, and entertainment services to the students. CIEE could not recoup a refund on some of those services and therefore it did not pocket all of the money the company declined to refund. - 9 - Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267
F.3d 30, 34 (1st Cir. 2001) (applying Maine law)). But even from
that perspective, 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.
Paragraph 14 certainly seems expansive at first glance.
It calls for refunds "due to low enrollment or any other reason,"
but contractual interpretation does not start and end on reading
one phrase in isolation. See id. at 137. The rest of Paragraph
14 provides support for the view that the provision is limited to
events before a program begins. Aside from the "any other reason"
descriptor, Paragraph 14 focuses on there being a "minimum number
of participants" so that the program can move forward.
This interpretation gains support when we look to the
more specific contractual provisions of the Program Cancellation
section of the Terms and Conditions. See Buck Constr. Co., 756
A.2d at 517-18 (noting that more specific contractual provisions
inform the meaning of more general language); Dow v. Billing, 224
A.3d 244, 250–51 (Me. 2020) ("[S]pecific terms and exact terms are
given greater weight than general language." (quoting Restatement
(Second) of Contracts § 203(c) (Am. Law Inst. 1981))). The first
paragraph of the Program Cancellation section contains language
mirroring Paragraph 14's "due to low enrollment or any other
reason" clause. The Program Cancellation section's first
- 10 - paragraph then adds the more specific limitation that refunds are
available when "a program is canceled prior to the start of the
program, due to low enrollment or any other reason." (Emphasis
added.) The second paragraph of the Program Cancellation section
discusses what occurs if a program is "cancelled following the
program start date." (Emphasis added.) As quoted above, the
paragraph does not provide for a refund in that instance, instead
listing out how "CIEE will make reasonable efforts to make
alternative arrangements" so that students can complete their
coursework. This paragraph's silence regarding refunds when read
in connection with the first paragraph's express limitation about
refunds only permits a single interpretation; CIEE had no
contractual duty to provide refunds to students, like Zhao, when,
as here, the program cancellation occurred after the program's
start date. Cf. Stone v. U. S. Envelope Co., 111 A. 536, 537 (Me.
1920) (agreeing to certain stock security rights implied that the
contract did not provide for other stock participation); NLRB v.
SW Gen., Inc., 137 S. Ct. 929, 940 (2017) (holding that "[t]he
force of any negative implication . . . depends on
context.")(quotation omitted).
In transitioning its programs to an online platform so
that Zhao and other participants could complete their academic
work, CIEE complied with the second paragraph of the Program
Cancellation section and with Paragraph 14. CIEE acted accordingly
- 11 - because the paragraph "did not create any binding terms [regarding
refunds] that [CIEE] could have breached." Hirschfeld v. Athena
Point Lookout, LLC, No. 1:18-cv-00203-GZS, 2018 WL 5848968, at *3
(D. Me. 2018) (citing Me. Mun. Emps. Health Tr. v. Maloney, 846
A.2d 336, 338 (Me. 2004) (dismissing a breach of contract claim
because the contract did not create the duty to reimburse which
defendant had allegedly breached)).6
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. More so considering that
the Participant Contract and its addendums must be read together.
See Crowe, 334 F.3d at 137. Therefore, CIEE did not breach the
Participant Contract when it migrated Zhao and other participants'
coursework online but did not issue refunds for undelivered
services.
6 Zhao also contends we should interpret the contract favorably towards her because it is an adhesion contract. See Barrett v. McDonald Invs., Inc., 870 A.2d 146, 150–51 (Me. 2005); Dairy Farm Leasing Co. v. Hartley, 395 A.2d 1135, 1139–40 n.3 (Me. 1978). However, where contractual language has an indisputable plain meaning, we need not adopt the reasonable expectations of the less powerful contracting party because both parties would have the same interpretation of unambiguous language. See Gove v. Career Sys. Dev. Corp., 689 F.3d 1, 7-8 (1st Cir. 2012) (quoting Barrett, 870 A.2d at 150–51); see also Gamma–10 Plastics, Inc. v. Am. President Lines, Ltd., 32 F.3d 1244, 1253 (8th Cir. 1994) (noting that "[a]lthough a bill of lading is a contract of adhesion, the language . . . is clear and we can only interpret it to mean what it says"); Crowe, 334 F.3d at 137. - 12 - Other Arguments Related to Liability Limitation Clauses
In its Motion to Dismiss, CIEE argued that certain
paragraphs in the Participation Contract that limit CIEE's
liability for injuries or losses resulting from pandemics, among
other events outside of CIEE's control, supported its position
that the contract unambiguously does not require CIEE to provide
refunds after the start date of a study abroad program.7 In
7 Paragraph 18 of the Participant Contract provides that CIEE is not responsible for injury, losses, or damages due to causes beyond its direct control such as "epidemics":
Without limitation, CIEE is not responsible for any injury, loss, or damage to person or property, death, delay, or inconvenience in connection with the provision of any goods or services occasioned by or resulting from, but not limited to, acts of God, force majeure, acts of government . . . epidemics or the threat thereof, disease, lack of access to or quality of medical care, difficulty in evacuation in case of a medical or other emergency, or for any other cause beyond the direct control of CIEE.
Likewise, Paragraph 19 provides that a participant "understand[s] that perceived or actual epidemic . . . can delay, disrupt, interrupt or cancel programs" and they "agree to assume all risk of any such problems which could result from any such occurrences."
Lastly, Paragraph 23 explains that a participant will hold CIEE harmless for events outside its control, including "pandemics," which disrupt or result in the cancelation of study abroad programs:
[U]understand[s] that perceived or actual events (such as, but not limited to, political turmoil / unrest, economic collapse, environmental issues, natural disasters, pandemics, epidemics, university strikes, terrorist events, governmental travel warnings, and many - 13 - response, Zhao posited that these liability limitations, if read
to prohibit refunds, "creat[ed] an ambiguity . . . for the fact
finder to resolve "when compared with Paragraph 14's broad refund
language. The district court agreed with CIEE.
We can once more rely on basic principles of contract
law to demonstrate why these liability limitation paragraphs do
not affect our interpretation of Paragraph 14 and the Program
Cancellation section paragraphs. As noted, in Maine law the more
specific contractual language controls the more general. See
Billing, 224 A.3d at 250–51. The liability limitation paragraphs
discuss "loss," "assum[ing] all risk," and "hold[ing] harmless";
they say nothing about refunds. Paragraph 14 and the Program
Cancellation section, on the other hand, focus on refunds (as
discussed above). We therefore needed only to rely on those
provisions and not the liability limitation paragraphs to have
concluded that the Participant Contract and its Terms and
Conditions unambiguously do not require CIEE to provide Zhao with
a refund when her program was cancelled following the start date.
Continuing on, Zhao also avers that if these liability
limitation paragraphs can be interpreted to permit CIEE not to
other events outside CIEE’s control, such as those described in paragraphs 18-19, 21-22) can delay, disrupt, interrupt or cancel programs. I agree to hold harmless CIEE from any such actual or perceived events.
(Emphasis added.) - 14 - refund her (as the district court concluded), they would constitute
unenforceable liquidated damages provisions. Her opening brief
suggested that we remand to grant her leave to amend her complaint
so that she can seek declaratory judgment to that effect. However,
in her reply brief and at oral argument, Zhao pivoted and
disclaimed any independent assertion that the paragraphs were
unenforceable liquidated damages clauses. Rather, she argued that
the district court's interpretation of CIEE's refund
responsibilities would lead to unreasonable results because those
paragraphs would prevent aggrieved students from recovering in a
whole host of situations not present here. In other words, she
used the unreasonable result as a way to argue for her preferred
interpretation of Paragraph 14. In any event, even if we permitted
remand, Zhao would lose because the paragraphs cannot be liquidated
damages clauses.
Maine law provides that liquidated damages compensate
injured parties for damages suffered when a contract is breached.
See Denutte v. U.S. Bank, N.A., 213 A.3d 619, 627 (Me. 2019). They
are meant to indemnify the non-breaching party for the breaching
party's actions. See id. at 628. The Participant Contract's
liability limitation paragraphs hold CIEE harmless for a range of
injuries associated with events outside of CIEE's control. They
are not intended to make CIEE whole for breaches by participants.
They do not compensate or indemnify CIEE if a participant breaches
- 15 - the agreement or withdraws from a program. They are liability
limitations, not liquidated damages clauses. The cases cited by
Zhao are inapposite.
Zhao's opening brief also argued the district court's
interpretation of the liability limitation paragraphs would make
the contract unconscionable and thus unenforceable in a set of
factual circumstances not present here (namely, if CIEE cancelled
the program after day one). As with her claim regarding liquidated
damages, Zhao's reply brief and her statements at oral appear to
have waived any argument that the contract is unconscionable. But
even if Zhao has not waived her claim, we see no reason to remand
to permit Zhao to amend her complaint. For one, we once more note
that these liability limitation provisions say nothing about
refunds. For another, Zhao's contentions would fail as a matter
of law.
There are two types of unconscionable
provisions: procedural and substantive. The party alleging
unconscionability bears the burden of establishing either type.
See Blanchard v. Blanchard, 148 A.3d 277, 282 (Me. 2016). In
Maine, "[p]rocedural unconscionability is broadly conceived to
encompass not only the employment of sharp practices and the use
of fine print and convoluted language, but a lack of understanding
and an inequality of bargaining power." Id. at 283 (quoting Am.
Airlines, Inc. v. Wolens, 513 U.S. 219, 249 (1995)). There is no
- 16 - evidence at the time they signed the contract that Zhao or any
other program participant were subjected to "sharp practices" by
CIEE or that they could not understand the contract. The relevant
contractual language was not hidden in fine print. Nowhere is
this clearer, as CIEE posits in its brief, than the top of the
very first page of the Participant Contract, which includes the
following language in bold: "This form is important. It includes
terms and conditions and releases CIEE from liability. All
participants MUST sign this form." Furthermore, the parties'
relative bargaining powers are insufficient standing alone to show
procedural unconscionability because the record does not
demonstrate that Zhao (the weaker party) signed the contract as a
result of any "exploitation" or "undue influence" from CIEE.
Kourembanas v. InterCoast Colls, 373 F. Supp. 3d 303, 321 (D. Me.
2019) (applying Maine law) (citing Restatement (Second) of
Contracts § 208, cmt. d (unequal bargaining power not alone enough
to set aside unfavorable contract terms)).
As to substantive unconscionability, Zhao claims it is
unconscionable that the Participant Contract does not require
refunds after the program start date because that interpretation
would create a windfall for CIEE by retaining all payments made by
participants. Yet Zhao fails to evince how the Participant
Contract is an agreement which is "so one-sided as to shock the
conscience." Blanchard, 148 A.3d at 283 (first quoting Barrett,
- 17 - 870 A.2d at 156 (Alexander, J., concurring) and then citing Bither
v. Packard, 98 A. 929, 932 (Me. 1916) (noting that to void the
contract as "unconscionable . . . shocking the conscience must be
apparent.")). The allocation of risk in the liability limitation
provisions and in the refund provisions does not rise to the level
of unconscionability. See id.; see also Lloyd v. Sugarloaf
Mountain. Corp., 833 A.2d 1, 4 (Me. 2003) (upholding liability
release when the language "expressly spell[ed] out with the
greatest particularity the intention of the parties contractually
to extinguish negligence liability." (quoting Doyle v. Bowdoin
Coll., 403 A.2d 1206, 1208 (Me. 1979))).
We see no reason that these liability limitation
provisions affect whether Zhao can receive a refund under Paragraph
14 and we also see no reason to remand for her to seek declaratory
judgment about liquidated damages clauses or unconscionability
claims.
CONCLUSION
For the foregoing reasons, we affirm the district
court's dismissal of Zhao's complaint. Each party to bear its own
costs.
- 18 -