BYU Arbitration Rulings & COVID-19

You might be aware that BYU just released the first two arbitration rulings last night (May 7th). They’re attached if you’d like to read them (as “Ruling #1” and “Ruling #2”), or Click Here to find them on BYU’s website.  I was concerned that these rulings would be completely one sided. That was especially true after I read Ruling #1 that was in favor of the tenant, but then Ruling #2 came back in favor of the landlord.  These rulings show that each case you’re dealing with should be evaluated on a case by case basis with these two rulings used as guidance.

Let me give our thoughts on what we noticed in the rulings.

 

Arbitration Panel and Rulings:

First – BYU normally handles these cases with an arbitration panel of three people (a representative from BYU, a student representative that’s usually a law student, and a landlord or property manager).  However, the arbitration rules from BYU allow them to set a panel of between 1-3 arbiters.  With the slew of cases that BYU is seeing, they decided to reduce the arbitration panel down to one single arbitrator (Anthony Schofield).  He will decide the first few rounds of cases and issue several written rulings that are published in order to provide guidance for future cases.

Mr. Schofield spent 13 years as a district court judge in Provo hearing a variety of civil and criminal cases.  He retired from the bench in 2007, but worked for a local law firm for several years after that.  He has an excellent reputation in the legal community and is very well respected.  I used him as a mediator several years ago and found him to be very compassionate, fair, experienced and knowledgeable.  In his rulings he stated that he conducted the arbitrations via Zoom, reviewed all briefs of the parties, and 24 amicus briefs that were submitted by various groups.

 

Facts of the Cases:

The facts of any case dictate the end result.  Several facts were nearly identical, but others were important distinctions:

  • Facts of Both Cases:
    • Both residents were in existing leases as of January 2020 when the global pandemic began hitting China, and both leases were set to terminate in August, 2020.
    • On March 14, 2020, BYU Off Campus Housing Office (OCHO) sent a notice to many landlords stating: “The OHCO recognizes that the contract is a legally binding agreement between the landlord and the student. However, the OCHO strongly encourages landlords and their agents to consider the value of releasing students. BYU has encouraged students to consider leaving campus and return home to finish Winter semester through remote coursework.”
    • Based on BYU closing campus and encouraging students to return home, both residents actually did return home and left the Provo area.
    • Both residents attempted to use Paragraph 23B to terminate their leases, and both landlords refused.
    • Both residents continued to participate in BYU courses remotely as suggested by BYU.
  • Distinguishing Facts in Ruling #1:
    • A roommate in Tenant #1’s apartment had “a serious respiratory infection” and was “showing symptoms of COVID-19, and she would not self-quarantine herself.”
    • Tenant #1’s mother is a nurse and based on the global pandemic as well as these specific circumstances “was seriously and genuinely worried for the physical health, safety and wellbeing of her daughter.”
    • Tenant #1 moved out around March 15, 2020, but she did not remove all of her personal belongings.
    • Later, another roommate moved in that had “a serious infection”. When Tenant #1 asked the landlord about the health of the roommates, “she was told that the Landlord could not enter the apartment because the roommate was quarantined.”
    • Landlord #1 offered to move the resident to another unit, but Tenant #1 had already moved home and refused these offers.
    • Tenant #1 had paid rent through April, 2020.
  • Distinguishing Facts in Ruling #2:
    • Tenant #2 made general allegations about concerns over COVID-19, but nothing terribly specific to her circumstances.
    • Tenant #2 returned home to Texas around March 17, 2020.
    • A few weeks after returning home, city and county leaders in Texas issued orders to close businesses, quarantine and/or stay at home.

Summary of Rulings:

These first two rulings weren’t completely one sided against the landlord or the tenant.  Here are some of the deciding factors in the two rulings:

  • Ruling #1 was in favor of Tenant #1, mainly because she (and her mother who is a nurse) showed that there was a “personal threat to Tenant from a very sick roommate who has Covid-19 like symptoms [which] was terrifying to her and her mother.” Where the threat of serious illness was specific to Tenant #1 and hit in her own apartment, the arbitrator found that Tenant #1 was justified in moving out and terminating the lease.
  • Ruling #2 was in favor of Landlord #2 because Tenant #2’s concerns about “serious illness” were general in nature with no specific or direct threat to the tenant.  “Tenant did not assert that she or any of her roommates or family members is suffering from the virus or other serious illness. Many tenants have chosen to stay in their apartments during the pandemic, and Landlord continues to perform its obligations to those tenants.”  Page 4.

 

Legal Arguments and Theories:

Nearly all of these cases will focus on Paragraph 23B of the BYU lease, which states:

The Agreement may be automatically terminated, or terminated by the student, prior to its expiration, with all rental charges prorated through the last day of tenancy under the following circumstances and conditions…. If the student leaves school due to a verified unforeseeable and unexpected catastrophic loss or serious illness. In such instances, the termination of the Agreement is in effect after the landlord receives acceptable verification. Student shall forfeit security deposit and legal deductions.

 

Let me go through some of the important pieces of the rulings.

 

“Leaves School”

The landlords in both cases argued that “leave school” means withdraw from BYU.  Both tenants argued “leave school” means “leave campus”.  Instead of saying “leave school”, the announcement from BYU encouraged students to “leave campus” and continue via remote learning.  Mr. Schofield stated “The difference [between “leave school” and “leave campus”] is without meaningful distinction.”  Mr. Schofield found that leave school is geographical and means “leaving the area without withdrawing from enrollment at BYU.” 

However, the student still has to prove more than they left school.  They have to “leave school due to a verified unforeseeable and unexpected catastrophic loss or serious illness.”  The rest of the rulings focused on evaluating the reasons that a student may leave school and whether those reasons satisfy terminating the lease under Paragraph 23B.

 

“Serious Illness”

The two rulings are fairly consistent in their findings, but the “serious illness” issue is likely to be the most important distinction as you analyze your cases.

Both landlords argued that the “Tenant personally must be experiencing the illness”.  The residents argued serious illness should extend to (1) the global pandemic generally, or (2) if someone close to them (such as a roommate or a family member) experiences an actual or threatened serious illness.

The rulings found middle ground in that “serious illness” is NOT limited to a serious illness by the tenant personally, but there still must be a direct link to the resident and a serious illness.  The examples given by Mr. Schofield were: (1) a parent being diagnosed with terminal cancer, or (2) if a tenant “is personally and directly impacted by a virus, such as a family member or roommate experiencing the virus or virus-like symptoms.”  He concludes: “Simply put, for a tenant to take advantage of the serious illness provision of 23B, the illness must have a direct, personal effect on the tenant, not just a generalized pandemic as now afflicting the world.”

Where Tenant #1 had a roommate with a serious respiratory illness who would not self-quarantine which created a personal concern for her health and safety, Mr. Schofield found that she had left school due to a serious illness.  Because Tenant #2 only made general references to COVID-19 and did not show any direct link or concern, she did not leave school due to a serious illness.

 

“Unforeseeable and Unexpected”

Both rulings were quick to point out that when the leases were signed in January 2020 no one (landlord or tenant) foresaw or expected the speed or extent of the global COVID-19 pandemic.

 

“Verified”

The global pandemic is certainly “verified” in a general sense and has “dominated the daily news for weeks.”  But the global pandemic by itself is insufficient to terminate the lease.  The student must verify that they personally have suffered a serious illness (or threat of serious illness under Ruling #1) or catastrophic loss.

In Ruling #1 Mr. Schofield found that the student had verified a serious illness because of the known symptoms and issues within her unit from an ill roommate that had COVID-19 symptoms and refused to self-quarantine.  In Ruling #2 Mr. Schofield found that the student failed to “provide any verification of illness personally impacting her in some fashion.”  There was “neither assertion nor verification of some direct, personal impact of the serious illness.”

 

“Catastrophic Loss”

Tenant #1 focused on “serious illness” and did not assert in her termination notice to have suffered a “catastrophic loss”, so Ruling #1 does not address this issue in detail.  Ruling #1 does, however, state that losing part-time employment “fails to meet even a non-legal definition of a catastrophe.”

Ruling #2 contains the more lengthy legal analysis on catastrophic loss and begins by stating:

There is no question there has been a significant change in circumstances for all of us, for Landlord, Tenant and each person residing in the United States, even all around the world.  But is this pandemic a catastrophic loss as set forth in paragraph 23B? The simple answer is that there is no evidence of catastrophic loss.

This does not mean that no case could involve catastrophic loss; it just is not present in either of these cases.  For a tenant to claim catastrophic loss the tenant must show what loss they have suffered and then the arbiter would decide whether the loss is catastrophic.  While both tenants (and the world) have suffered some loss at the hands of COVID-19, the tenant has to articulate the specific nature of that loss and show it has been catastrophic.  The primary loss asserted in these cases was a reduction or termination of employment.  Mr. Schofield found that those circumstances are insufficient to show a catastrophic loss.

Ruling #2 also mentioned that many of the stay-at-home orders and other restrictions are being allowed to expire or are being modified.  Mr. Schofield stated that:

Tenant [#2] still can return to her apartment and participate in the active life of a BYU student like 60% of the tenants in her complex have chosen to do. That she may have been gone for a few weeks, as occurs at Christmas time, between semesters and at other times, does not render the lease any less valid.

While the landlords in both cases prevailed on the issue of catastrophic loss, these rulings leave open the possibility of others providing evidence of a catastrophic loss.  However, I believe it would take a unique set of facts to qualify for catastrophic loss.

 

Common Law Claims – Frustration of Purpose, Impossibility, & Impracticability.

Ruling #2 addressed other common law legal theories that the tenants were using to terminate the lease while Ruling #1 was silent on these theories.  Ruling #2 quickly dismissed both (1) impossibility and (2) impracticability, but spent considerable time focusing on frustration of purpose.

One particular case from the Utah Court of appeals in 2000 addressed frustration of purpose in detail.  Tech Ctr. 2000 LLC v. Zrii, LLC, 2015 UT App 281, ¶32, 363 P.3d 566.  Under Zrii, the doctrine of frustration of purpose applies when, “after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made.” The application of this doctrine “depends on the total or nearly total destruction of the purpose for which, in the contemplation of both parties, the transaction was made.” Id. ¶32.

Ruling #2 then addressed two primary questions (and provided answers) related to frustration of purpose:

  • Question #1 – What is the principle purpose of the contract?
    • Answer – For the landlord to provide, and the tenant to rent, BYU approved housing for the tenant to live.
  • Question #2 – How substantially was the principal purpose of the contract frustrated?
    • Answer – “That place is still available to her.”

The tenant argued that the purpose of the contract was more broad – “to provide space for a tenant to live in order to be able to enroll in and attend daytime classes on campus at BYU.”  The ruling continued that it was clear Tenant #2 would be attending BYU, but that was an individual purpose of Tenant #2, not a general purpose of the lease.  “The principle purpose of the contract was to provide a BYU approved place for Tenant [#2] to live.”

While COVID-19 has caused problems worldwide, Ruling #2 states that “Performance of the lease is still possible for both parties. Indeed, large numbers of other tenants remain in their residences in the complex. … But where performance under the contract remains possible, even completely doable, I cannot find that for Tenant to continue to reside in the apartment and pay rent after BYU closed its campus was so pointless as to cause the total or nearly total destruction of the contract purpose.”

 

Rulings of Both Cases

After walking through this analysis, Mr. Schofield issued the following rulings:

  • Ruling #1 – The lease was terminated through Tenant #1’s notice on March 18, 2020 when she left school due to a verified unforeseeable and unexpected serious illness.  This was largely based on Tenant #1’s (and her nurse mother’s ) direct concerns for her health and safety where her roommate had a serious respiratory illness, was showing signs of COVID-19, and refused to self-quarantine.  Where Tenant #1 did not remove all of her personal belongings, Tenant #1 was ordered to pay: (1) rent through April 30, 2020 (instead of the termination date of March 18), and (2) forfeit the security deposit and pay legal deductions as required by the lease.
  • Ruling #2 – Tenant #2 failed to terminate her lease under Paragraph 23B and remains responsible for the lease through August 2020 unless she sells her contract as allowed in the lease.  The deposit is not forfeited, and Landlord #2 needs to credit the deposit against any balance owed.  As stated in the ruling, “Tenant [#2] bases her serious illness claim on the terrible nature of the pandemic generally, without any assertion of any direct, personal effect to herself from the pandemic. In order for a student’s leaving to be “due to” a serious illness, the serious illness must have a direct, personal effect on the tenant. Absent that, as here, there is no basis to justify termination under this branch of 23B.” 

 

What About Your Case?

Several sections in the rulings state that these cases are being decided on the specific facts of these cases.  The closer your set of facts is to these rulings, the more helpful (or detrimental) these rulings will be.  Regardless, each ruling gives a statement that future cases will be decided on their own facts and merits.  Use these rulings as guides, but do not ignore the facts in your circumstances that are different from these cases.

 

Questions or Concerns?

As stated above, every case is different but should be considered under the guidance of these two rulings.  Contact our office if you need legal representation.

Sincerely,

Jeremy Shorts