In an April 29, 2012 article, the New York Times explored a very timely issue facing New York City parents: what happens when a family commits to sending a child to private school, then changes its mind?
This issue has arisen in several contexts lately. The New York Times piece explored the situation of a family on the Upper West Side that committed to sending their child to a Manhattan private school, paid the deposit, promptly notified the school well before the start of the school year that the family could no longer afford the tuition, but was told by the school that, despite the probability that another family would jump at the chance to take their child’s spot, the family was still on the hook for the nearly $30,000 annual tuition. The Times piece also explored another common scenario, where the deadline to accept a spot at a private school precedes the date on which the public school Gifted & Talented programs send out their acceptances. Parents who, understandably, would prefer that their children attend no-cost G&T programs over exorbitantly-priced private school programs, have found that the private schools are not so forgiving about these broken agreements. Many schools have gone so far as to sue these parents for the full amount of tuition for the year, even if they have wait lists to fill any vacant spots.
These situations are frustrating, to be sure – both for parents, who desire flexibility, especially when being asked to pay upwards of $20,000 to $30,000, per child, for a year of elementary education, and for the schools, who themselves may be cash-strapped in this poor economy, need to rely on enrollment projections from the admissions process, and benefit from tuition forfeiture in these situations to stay afloat.
Something has had to give, however, and that something may be the case Gunderson v. Park West Montessori, Inc., a 2009 case from the New York State Supreme Court in New York County. In Gunderson, a Manhattan family committed to send their child to Park West Montessori preschool (at an annual cost of $19,300). The child’s mother, Sarah Brooks, was an adjunct lecturer at SUNY Stony Brook who obtained a tenure-track assistant professorship at James Madison University in Virginia. The child’s father, Erik Gunderson, also obtained a position at the University of Virginia Medical Center, and they decided that moving to Virginia was the best option for their family. The family informed Park West in April of 2009 that they were moving, and that their son would not be attending Park West in the fall. This amounted to approximately 5 months’ notice to the school of the family’s intentions. Park West, however, took the position that the family was still obligated to pay Park West the full tuition for the 2009-2010 academic year, even if the family decided to move.
Gunderson and Brooks sued Park West for, among other things, a return of tuition monies already paid, a declaratory judgment that no further monies were owed to Park West and a declaratory judgment that the clause in Park West’s enrollment agreement obligating Gunderson and Brooks to pay for the full year, even if they moved, was void and unenforceable. On Gunderson and Brooks’ motion to compel Park West to provide documentation through discovery to support Park West’s claim of damages in the full amount of the annual tuition, New York Supreme Court Justice Walter B. Tolub held that the clause in the enrollment agreement obligating the parents to pay tuition, even if they move, would be enforceable only to the extent that Park West would actually incur damages due to the child not attending the school (also known as a liquidated damages clause). The clause would not be enforceable, however, if the parents’ payment of the full tuition was a penalty for the child not attending the school, which was not tied to any actual damages sustained by the school. Gunderson and Brooks, the court ruled, were entitled to discovery on the question of whether Park West was actually financially harmed by their child not attending the school.
What constitutes harm in this situation? According to Tolub’s decision, liquidated damages must be proportionate to actual loss suffered. If a school maintains a wait list for its classes, or if such school denied students admission to its classes due to the classes being full, it may suffer no damage at all if a child pulls out of the school months in advance of the school year, because another child is available to take the first child’s place. Or, if a school does not maintain a wait list, and if another student is unavailable to take the departing child’s place, the school may be damaged up to the full amount of the annual tuition. It is a fact-specific inquiry and, the judge ruled, the parents are entitled to documentation of the actual damages the school would suffer if their child does not attend. It would be an unenforceable penalty for a school to promptly admit another child off the wait list to take the place of the departing student, and charge the departing student a full year’s tuition, effectively receiving double payment for the same spot at the school.
It appears from an order of the Supreme Court, Appellate Division, First Department, dated November 24, 2009, that Park West did initially appeal Tolub’s decision, then quietly reached a settlement with Gunderson and Brooks, which the court so-ordered on November 2, 2009. Therefore, at least for the time being, Gunderson is the prevailing law in New York.
What this means, in practice, remains to be seen. I recently represented a Brooklyn family who pulled their daughter out of a private school after the first day of school when, they believed, actions undertaken by the school breached their enrollment agreement. I was able to successfully negotiate a return of tuition monies paid, and we entered into an agreement stipulating that the family owed no additional monies to the school. In this case, the school did have a wait list, and it is understood that another child most likely was offered (and accepted) the spot previously occupied by my clients’ child. What we may never know is whether this result, reached without resort to litigation, was due to Gunderson, or the school’s general distaste for bad publicity. However, it seems likely that the tide is already turning in New York City private schools, with a new trend toward greater flexibility for parents who are unable (or unwilling) to honor private school enrollment contracts.