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