A recent U.S. District Court for the District of Massachusetts decision sheds light on the limits of Massachusetts General Laws Chapter 93A, the state's unfair and deceptive trade practices statute, as applied to nonprofit educational institutions.
In High Expectations LLC v. KPCA Northwestern Presbyterian Theological Seminary, the plaintiff, High Expectations LLC – a Massachusetts-based English language school – sued KPCA Northwestern Presbyterian Theological Seminary, a Washington nonprofit seminary, along with two of its officers and an affiliated company. High Expectations alleged that KPCA operated a "pay to stay" scheme to attract international F-1 visa students, unlawfully enticing them to transfer by offering distance-learning programs that failed to meet federal attendance and proficiency requirements. Further, the plaintiff claimed that in 2024 KPCA expanded to Portuguese-language courses to target Brazilian students. According to the complaint, 91 of High Expectations' students – about one-third of its enrollment – transferred prematurely to KPCA. The plaintiff also alleged visa and tax fraud, including misrepresenting student qualifications and underreporting tuition revenue.
Based on these allegations, High Expectations brought claims under Chapter 93A, Section 11 (unfair business practices), tortious interference with business relations, and civil conspiracy.
Court's Ruling: Nonprofit Educational Activities Not Subject to Chapter 93A
In response to KPCA's motion, the district court dismissed the Chapter 93A claim, holding that KPCA, as a nonprofit seminary, was not engaged in "trade or commerce" under Chapter 93A when enrolling students in its degree programs. The Massachusetts Supreme Judicial Court has concluded that "where the Legislature employed the terms 'persons engaged in the conduct of any trade or commerce,' it intended to refer specifically to individuals acting in a business context[.]"
Factors in determining when parties act in a "business context" include:
- the nature of the transaction
- the character of the parties involved
- the activities engaged in by the parties
- whether the transaction is motivated by business or personal reasons
Massachusetts courts have held that activities purely incidental to a university's or nonprofit's educational mission are not considered business conduct and not subject to Chapter 93A – even if those activities generate revenue or allegedly involve fraud. The nonprofit status of an entity is not dispositive, but courts must examine whether the challenged conduct is central to the institution's core mission.
Here, the district court found that activities tied to KCPA's core educational mission – such as setting academic standards and admitting students – did not constitute business conduct subject to 93A. The court contrasted this case with Linkage Corp. v. Trustees of Boston University, where a university contracted with a third party for revenue-driven services outside its educational mission, which was held to be within the scope of the statute. KPCA's alleged conduct centered on core religious and educational functions and therefore fell outside the statute's reach.
Key Takeaways for Educational Institutions and Nonprofits
This case demonstrates that the scope of Chapter 93A is not unlimited. Parties considering claims under Chapter 93A should carefully analyze whether the challenged conduct was undertaken in a business context. Even if the alleged conduct involves fraud or generates revenue, it may fall outside the reach of Chapter 93A if it is closely tied to a nonprofit's core educational mission.
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