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, )

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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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