Wards Corner Beauty Academy v. National Accrediting Commission of Career Arts & Sciences
Filing
113
MEMORANDUM ORDER entered and filed 10/20/17: This matter is before the Court on cross-motions for summary judgment associated with Defendant's withdrawal of Plaintiff's accreditation as a barbering and cosmetology academy. ECF Nos. [6 3], 70 . Defendant's summary judgment motionseeks resolution of the entire case in its favor, whereasPlaintiff's motion seeks partial summary judgment consisting ofa Court order reinstating Plaintiff's accreditation, followed by a j ury trial to determine money damages. Id., as outlined. Plaintiff is therefore INSTRUCTED to file a status update/supplemental brief clarifying its trial demand no later than October 26, 2017, as outlined, and should not exceed fifteen pages in length. Defendant is INSTRUCTED to file a responsive brief no later than November 1, 2017, as outlined, and it is similarly limited to fifteen pages. To the extent that the parties believe that further settlement discussions may be fruitf ul prior to, or after, the submission of such supplemental briefs, the parties should contact the calendar clerk for the Magistrate Judge who conducted the original settlement conference in this case. (See Order and Foot Notes for Specifics) (Signed by District Judge Mark S. Davis on 10/20/17). Copies provided as directed 10/20/17. (ecav, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
Norfolk Division
WARDS CORNER BEAUTY ACADEMY,
Plaintiff,
Civil No.
V.
2:16cv639
NATIONAL ACCREDITING COMMISSION
OF CAREER ARTS & SCIENCES,
Defendant.
MEMORANDUM ORDER
This
matter
summary
judgment
Plaintiff's
academy.
seeks
is
before
the
associated
accreditation
EOF Nos.
resolution
63,
of
with
as
70.
Court
on
cross-motions
Defendant's
a
barbering
withdrawal
and
for
of
cosmetology
Defendant's summary judgment motion
the
entire
case
in
its
favor,
whereas
Plaintiff's motion seeks partial summary judgment consisting of
a Court order reinstating Plaintiff's accreditation,
a jury trial to determine money damages.
As
recognized
Training
Colleges,
Ctr.,
781
accreditation
by
Inc.
F.3d
action
involving
a
withdraw
Plaintiff's
the
v.
Fourth
Id.
Circuit
Accreditation
161
is
deferential
(4th
a
review
All,
Cir.
special
of
accreditation,
followed by
in
Prof'l
Massage
of
Career
Sch.
2015),
species
of
Defendant's
and
the
the
civil
&
instant
action
decision
to
"appropriate
standard"
applicable
in
such
a
case
typically
Court from conducting any form of trial,
administrative
record
through
precludes
the
or even expanding the
discovery.
Instead,
a
court
reviewing an accreditation decision is typically constrained to
reviewing
"the
record
that
was
considered
agency at the time of the final decision."
by
the
Id. at 174-75.
Although the Administrative Procedures Act
("APA")
technically apply to accreditation review cases,
administrative
review]."
law are
Id.
governed by
at
useful
170
the APA,
in determining
(citation
omitted).
cross-motions
for
accrediting
does not
"principles of
the
In
standard
cases
summary
that
judgment
serve "as the mechanism for deciding" the case; however,
circumstance,
the
court
does
not
apply
the
for summary judgment set forth in Rule 56."
Markets Ass'n v.
67
F.
judge
Supp.
Sec.
3d
373,
399
APA
(D.D.C.
review
2014) .
ordinarily
Rather,
"sits
and the "entire case on review is a
with the complaint read as only advancing
Sharf stein,
omitted);
often
in such
"standard
Indus.
as
the
an
& Fin.
583
F,3d
see Haley v.
860,
865
(D.C.
appellate
"arguments about
Cir.
Under Sec'y of Commerce
Prop., 129 F. Supp. 3d 377, 381
district
question of law,"
legal conclusion to be drawn about the agency action."
V.
are
United States Commodity Futures Trading Comm'n,
performing
tribunal"
familiar
[of
(E.D. Va. 2015)
2009)
for
the
Rempfer
(citation
Intellectual
(same).
Although expansion of the record is typically precluded in
an
accreditation
discovery,
action,
a
more
searching
is permissible if a plaintiff makes a
of bad faith or improper behavior."
177-78
(citation
facts,
some
discovery
omitted).
limited
into
Commissioners
(Michael
of
business
interest
Virginia
Beach,
in a
(explaining
V.
that
was
chairman
Bouman)
Plaintiff's
had a
of
case-specific
to
Defendant's
include
Board
based
of
in the
on
his
competing cosmetology school located in
which
States,
"[w]here
record frequently will
the
review
include
781 F.3d at
pecuniary interest
is
less
Virginia school,^
United
on
authorized,
accreditation
Virginia,
Defendant's Norfolk,
Inc.
the
based
to
"strong showing
Prof'l Massage,
Here,
discovery
whether
outcome
Sols.,
review,
bias
93
is
Fed.
than
Cf.
Cl.
alleged,
15
miles
from
Pitney Bowes Gov't
327,
the
332
(2010)
administrative
not be complete or suffice
to prove or
disprove the allegation," and that "extrarecord evidence" may be
^ In authorizing discovery,
the Magistrate Judge assigned to this case
recognized that "the court's role in reviewing an accreditation decision
is limited and circumscribed," and that discovery must be "carefully
constrained" to avoid "contaminating" the administrative record.
May 2,
2017, Hearing Tr. 25-27, ECF No. 55.
The discovery permitted subsequent
to such hearing appears to have provided further support for Plaintiff's
preliminary showing that there was a conflict, and arguably undercuts some
of defense counsel's pre-discovery representations regarding the degree of
Chairman Bouman's pecuniary interest in the success of the Virginia Beach
school.
Id. at 13.
Specifically, Chairman Bouman: (1) appears to have a
minor ownership interest in the company operating the Virginia Beach
school; and (2) as an executive of such company, he received a bonus in
excess of $135,000 for the 2012-2013 year.
While the substantial bonus
should likely be juxtaposed with the fact that Chairman Bouman's company
operates over 85 schools in over 20 states,
these competing facts
illustrate the divergent inferences that can be drawn regarding the extent
of the pecuniary conflict at play in this case.
considered when there is a
"evidentiary foundation,"
non-speculative
Massage,
for
such as
motivation
781 F.3d at 178
bias
"strong showing" of bias based on an
is
to
through facts
act
in
bad
establishing a
faith);
(expressly noting that
impermissibly
high"
in
cf.
Prof'1
"the potential
cases
involving
an
adjudicator with a pecuniary interest in the outcome).
After considering the parties'
exhibits
from
supplemental
the
filings,
administrative
discovery,
it
is
record,
clear
to
to include numerous
as
the
well
Court
as
that
the allegations of a pecuniary conflict of interest,
would
resolve
record.^
the
cross-motions
Stated differently,
for
summary
the
accreditation
but
for
this Court
judgment
on
the
the applicable deferential review
standard renders it improper to conduct a
evaluate
limited
review
trial of any kind to
process/outcome,
with
the
exception of matters directly relevant to the asserted conflict
of
interest.
With respect to the conflict,
the record reveals
competing reasonable inferences that can be drawn from the newly
developed
facts,
non-speculative,
Plaintiff's
case
which
and
was
demonstrate
material
decided
the
existence
disputes
by
a
of
genuine,
regarding
whether
"fair
tribunal."^
^ In addition to the conflict issue, Plaintiff asserts that it was denied
due process in other ways, to include the sufficiency of the "notice" of
non-compliance and the length of time provided to come into compliance.
^ The Fourth Circuit has held that the essential due process guarantee of
an "impartial decisionmaker" applies in the context of a common law due
process claim.
Prof'l Massage, 781 F.3d at 177.
In defining "impartial,"
Accordingly,
proceedings
likely
in
of
the
apparent
to resolve disputed facts,
most
inferences
light
importantly,
to
cross-motions
draw
for
from
to
the
summary
need
judgment
further
credibility issues,
determine
facts,
for
the
which
Court
under
and
reasonable
will
advisement
take
the
pending
a
trial or other evidentiary proceeding limited to addressing the
alleged bias/pecuniary interest.
While
deferential
each
party's
summary
judgment
briefs
review
standard
that
accreditation
outline
applies
the
in
a
federal courts have held that " [p]articipation of adjudicators who 'might
conceivably have had a slight pecuniary interest' . . . does not offend
due process."
New
Comm'n, 198 F.3d 1,
York State Dairy Foods, Inc. v. Ne. Dairy Compact
13 (1st Cir. 1999) (quoting Aetna Life Ins. Co. v.
Lavoie,
475 U.S.
813,
825
(1985)).
In the accreditation/licensing
context, because there are recognized "advantages to the involvement of
industry representatives in licensing decisions,"
there are obvious
pitfalls in finding a disqualifying conflict "based solely on the fact
that there may on occasion be 'some' competition for clients," as such a
rule "would call into question the composition" of numerous boards across
various industries.
Stivers v.
Pierce,
71 F.3d 732,
743
(9th Cir.
1995).
That said, recusal protocols are plainly necessary to eliminate the
participation of individuals with a "substantial" pecuniary interest,
which may consist of a real and non-speculative competitive interest.
Illustrating such point through an example:
A lawyer in a one-lawyer town . . . would probably have a
"direct" and "substantial" pecuniary interest in the licensing
of a competitor planning to hang a shingle across the street.
On the other hand, i t is unlikely that any attorney practicing
in a
city like Los Angeles would have a
competitive interest
sufficiently strong to require that he be disqualified from
considering the licensing of an additional lawyer.
Id.
Here, there are genuine and material disputes as to the degree of
competition as there is conflicting evidence,
including:
(a)
record
evidence of a lack of competition (e.g.. Plaintiff's sworn assertions in
the amended complaint that its students are unlikely to seek an education
in
Virginia
Beach
or
at
other
schools
in
the
area);
and
evidence suggesting direct competition for students in a
(b)
record
localized area
(e.g.,
evidence indicating that Plaintiff operated a Virginia Beach
location during the relevant timeframe and record evidence that appears to
establish that some of
the
students enrolled at
P l a i n t i f f ' s Norfolk school
resided in Virginia Beach, ECF Nos. 28-6, 28-7, 28-8, 75-1).
"typical"
accreditation
review
case,
neither
party
expressly
addresses the proper path forward in the event that expansion of
the record is properly permitted,
conflicting
Notably,
a
facts
and
conflicting
reasonable
inferences/
Plaintiff's recent filings address only its request for
jury trial
as
to money damages,
Plaintiff is requesting a
a
yet such expansion results in
disqualifying
Moreover,
and do not
indicate whether
jury trial on the question of whether
pecuniary
interest
exists
in
to the extent that Plaintiff desires a
such issue,
this
jury trial on
the parties have not briefed whether Plaintiff has a
legal right to a jury determination on such issue.
parties'
should
filings
Plaintiff
do
not
That is,
Plaintiff
can
decisionmaker,
squarely
ultimately
disqualifying conflict,
claims.
case.
address
succeed
but fail
on
the
its
Finally,
proper
assertion
the
remedy
of
a
on its associated due process
assuming that the only due process violation
demonstrate
is
predicated
on
a
biased
the parties have not addressed whether the proper
* In addition to the disputes discussed in the preceding footnotes, there
are disputed inferences regarding the extent of Mr. Bouman's participation
in the accreditation review process, because although he did not "vote" to
withdraw Plaintiff's accreditation, he: (1) was one of several people that
reviewed Ward's Corner's file and signed the motion asking the Board to
withdraw Plaintiff's accreditation;
and
(2)
presided over the Board
meeting where
the withdrawal decision was made.
Governors of Registered Dentists of
1339, 1349, corrected (May 2, 1996)
Cf.
Johnson v.
Bd.
of
State of Okl., 1996 OK 41, 913 P.2d
("While the same strict requirements
applicable to adjudicators do not apply to administrative prosecutors,
serious
due
process
implications
arise
when
the
investigator
and
prosecutor have a personal financial interest in
proceedings."
(citing Marshall v.
Jerrico,
Inc.,
(1980))) .
the outcome of
446 U.S.
238,
the
250
remedy
is
reinstatement
Plaintiff,
or
a
of
accreditation
"remand"
for
a
^
as
requested
novo
by
administrative
accreditation determination by an unbiased panel.
Plaintiff
is
therefore
update/supplemental brief
than October 26,
2017.
trial,
to
limited
interest,
proper
jury
the
file
of
bias/pecuniary
jury trial,
Plaintiff
should
or
also
remand)
(1)
sufficient
opportunity
and
graduation
predicated on
"fair
a
sufficient
rate,
substantial
tribunal."
the
and
the
evidence;
Plaintiff's
the
the
(2)
cure
its
decision
withdrawal
and
address
Plaintiff was provided
and ultimate decision were otherwise valid,
a
and if
should
Court/factfinder ultimately conclude:
defective
status
the authority on which Plaintiff relies to
(reinstatement
notice
a
trial demand no later
issue
bench trial or a
demand.
remedy
to
Such filing should identify whether such
should be a
its
clarifying its
addressing
latter is requested,
support
INSTRUCTED
to
was
while
the
process
Plaintiff was denied
supplemental
brief
should not
exceed fifteen pages in length.
Defendant
similarly
is
INSTRUCTED
addresses
to
Plaintiff's
file
right
issue of bias/pecuniary interest
well as
(if a
a
to
responsive
a
jury
brief
trial
that
on
jury request is made)
the
as
the proper remedy should the Court/factfinder conclude
that the only proven due process violation was the absence of a
"fair
tribunal"
on
the
day
that
accreditation
was
withdrawn.
Such responsive brief shall be filed no later than November 1,
2017, and i t is similarly limited to fifteen pages.
To
the
extent
that
the
settlement discussions may be
submission
contact
of
the
such
parties
fruitful
supplemental
calendar
clerk
for
believe
that
prior to,
briefs,
the
the
further
or after,
parties
Magistrate
the
should
Judge
who
conducted the original settlement conference in this case.
The Clerk is REQUESTED to send a copy of this Order to all
counsel
of
record.
IT
IS
SO
ORDERED.
/s/l
Mark S.
UNITED
Norfolk, Virginia
October
,
2017
STATES
Davis
DISTRICT JUDGE
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