IU wins reversal in students’ mold-infestation lawsuit

Indiana University Bloomington claimed a victory in the legal fight over mold infestation in dorms, convincing the Indiana Court of Appeals to overturn the denial of the school’s summary judgment motion on all tort claims brought by the affected students.

The lawsuit against the university began in October 2018, when several IU Bloomington students filed a tort claim notice on behalf of students suffering “due to their exposure to mold that has infested their residential dormitories at IU Bloomington[,]” including the Foster and McNutt dorms. The plaintiffs brought a class-action complaint for breach and declaratory judgment seeking remediation of the mold problem.

Remediation efforts had already begun at the time the complaint was filed, so some students were relocated from the affected dorms. Also, air filters were placed in Ashton, Wright, Collins and Hillcrest dorms as a precaution, but the filters led to noise complaints.

The university applied more than $7 million in bursar credits to the accounts of the affected students. Thus, in January 2019, IU denied the tort claim notice on the grounds that it had “already expended more than one-point-five times its aggregate statutory liability under the (Indiana Tort Claims Act) in mold-related compensation to students for this event.”

The complaint was later amended to include eight counts alleging breach of contract, breach of implied warranty of habitability, negligence, negligent failure to warn, constructive fraud, negligent infliction of emotional distress, money had and received, and unjust enrichment. After the school lost on a motion to dismiss, the plaintiffs moved to certify four proposed classes, three of which were granted certification: a “moldy dorms” class related to students living in mold-infested dorms, a “noise polluted dorms” class related to the presence of the air filters, and a “tort issues” class related to the three negligence and constructive fraud claims.

Meanwhile, IU moved for partial summary judgment on all but the breach claims, pointing to the $7.7 million it had paid to students. The Monroe Circuit Court denied that motion, finding the money had and received and unjust enrichment claims were not torts. The trial court also found a factual dispute as to whether the ITCA’s liability cap, $5 million, had been met.

The school appealed both the denial of summary judgment and the three class certifications, and the Indiana Court of Appeals reversed on all counts in a Wednesday opinion.

Judge Terry Crone, writing for a unanimous appellate panel, first addressed the issue of whether the moldy dorms and noise polluted dorms classes were properly certified.

“…(A)s the University points out, the amended complaint ‘asked for court-ordered remediation[,]’ but the Moldy Dorms and Noise Polluted Dorms Classes claim that the University ‘breached its contract and the implied warranty by conducting remediation,’” Crone wrote. “We agree with the University that this sets up an untenable ‘double bind’: ‘[s]ue and ask for a remedy and if the remedy is implemented then change your claims in the class papers to turn the remedy into a breach.’

“We further agree with the University that we should not condone such ‘gotcha’ tactics; instead, we should ‘encourage our institutions to take steps to swiftly remedy issues like indoor mold growth’ and not ‘disincentivize proactive responses in similar circumstances,’” the judge continued. “In other words, we refuse to perpetuate the adage that no good deed goes unpunished. Accordingly, we reverse the trial court’s certification of the Moldy Dorms and Noise Polluted Dorms Classes.”

Turning next to the issue of the tort claims, the appellate panel pointed to an affidavit from the IU bursar, who said more than $7 million in payments were made to students who were impacted or “potentially” impacted by the mold. The plaintiffs argued the word “potentially” implies a question of fact as to whether that amount satisfied the ITCA cap, but the panel pointed to prior judicial admissions that all class members were “injured” by the mold, even if the injury was not physical.

“Contrary to what the trial court’s order suggests, the ITCA does not require that a claimant prove both the existence and the amount of loss before the claim may be settled by a governmental entity,” Crone wrote for the panel. “… In sum, we hold that the University’s payments to Foster and McNutt residents exceeded its aggregate liability for the Plaintiffs’ tort claims under the ITCA and that the trial court erred in denying its motion for partial summary judgment on those claims.”

In a footnote, Crone wrote that the panel did not address IU’s argument against the certification of the “tort issues” class because it ruled that the school should have been granted summary judgment on the tort claims.

Finally, the COA reversed the finding that the money had and received and unjust enrichment claims were not tort claims, finding instead that those claims were governed by the ITCA.

“The damages, although purely economic, are the consequences of the University’s allegedly tortious conduct,” Crone concluded, remanding for further proceedings in Indiana University, by and through its Board of Trustees v. Jaden Thomas, et al., individuals, each on behalf of himself and all others similarly situated, 20A-PL-361.

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