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Wednesday, May 2, 2012

Trend Spotting: Suits Over Liquidated Damages in Private School Contracts

If you teach O'Brian v. Langley School, you will want to read a NY Times article from earlier this week, For Some Parents, Leaving a Private School is Harder Than Getting In.  Here's a taste:

In February 2011, Nicole Smolowitz’s son was admitted to the Mandell School on the Upper West Side. She signed a contract and paid the $7,500 deposit.

By late April, the family’s financial situation had changed, and private school was no longer an option. Ms. Smolowitz called the school to say her son would not be able to attend. She did not expect to get her deposit back — but she was told she had to pay the remaining $26,250, as well.

“It’s April,” she said she told them. “I will find someone for you to take my child’s spot.” The school told her that was not how things were done. Then, in September, Mandell sued.

For most parents, getting their child into a private school is a moment of joy, or at least relief. But uncomfortable conversations take place at this time of year, as some parents reconsider.

Sometimes these conversations lead to an amicable parting. Other times, they lead to a bare-knuckled fight in court.

Since 2009, at least five private schools in New York City — Mandell, York Preparatory School, Friends Seminary, Léman Manhattan Preparatory School and the Little Red School House and Elisabeth Irwin High School — have sued parents for tuition.

The schools’ argument is simple: Parents sign a contract when they accept placement, saying they will send their child to the school the next year and pay the agreed-upon price.

The article includes discussion of a few specific cases, including the Gunderson case:

In 2007, Erik Gunderson and Sarah Brooks enrolled their son for another year at Park West Montessori School, a preschool on the Upper West Side of Manhattan. They put down a deposit of $4,700 of the $19,300 tuition.

Soon afterward, Ms. Brooks was offered a tenure-track position at a university in Virginia. When she told the school that her family was moving, the school said she had to pay the remaining tuition, according to the lawsuit. Her father, Russell Brooks, a lawyer at Milbank, Tweed, Hadley & McCloy, represented her in court, and won a ruling forcing Park West to turn over records showing that it would be financially harmed by his daughter’s decision to withdraw her son.

“They had no damages,” Mr. Brooks said. “The entire contract amount — the deposit amount plus what they were seeking — would be a windfall to them, because they could fill up the spot in the class from the waiting list.”

Mr. Brooks said the school dropped its demand for payment.

Kathy Roemer, executive director of Twin Parks Montessori Schools, which includes Park West, said the Gundersons’ deposit had not been refunded. The court denied the school’s counterclaim for the remaining tuition, and while Dr. Roemer called that ruling “contrary to basic contract law,” the school did not pursue the case because “the amount was too small.”

Since the Gunderson case, other parents, including Ms. Langbecker, have used the same defense, arguing that schools must prove they have been hurt financially. It is unclear how successful this argument is, as many cases are settled out of court.

Read the article.  Given that tuition at some private schools in Manhattan has surpassed the $40,000 mark, file it under "rich people problems."

[Meredith R. Miller h/t Robert Merrihew]

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