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Wards Corner Beauty Academy v. National Accrediting Commission of Career Arts & Sciences

United States District Court, E.D. Virginia, Norfolk Division

November 26, 2017

WARDS CORNER BEAUTY ACADEMY, Plaintiff,
v.
NATIONAL ACCREDITING COMMISSION OF CAREER ARTS & SCIENCES, Defendant.

          OPINION AND ORDER

          MARK S. DAVIS UNITED STATES DISTRICT JUDGE

         This matter is before the Court on cross-motions for summary judgment associated with Defendant's ("NACCAS") withdrawal of Plaintiff's ("Wards Corner") accreditation as a barbering and cosmetology academy. ECF Nos. 63, 70. In light of the limited judicial review legally permissible in an accreditation action, Prof'l Massage Training Ctr., Inc. v. Accreditation All, of Career Sch. & Colleges, 781 F.3d 161 (4th Cir. 2015), and the record before the Court, the Court issued an Order on October 20, 2017, concluding that the only issue in this case that was subject to a "trial or other evidentiary proceeding" is Plaintiff's claim that Defendant's accreditation withdrawal decision was not made by an "impartial decisionmaker." ECF No. 113, at 4-5. All other issues, which must be decided based only on the record, were taken under advisement. Id. As to the bias issue, the Court requested additional briefing on whether Plaintiff had a right to a jury-trial and raised questions as to the proper remedy should Plaintiff succeed at the conclusion of the trial on bias. Id. at 7-8.

         The Court has now received supplemental briefs from both parties, ECF Nos. 123, 125, and has conducted extensive research on the issues of remedies and jury trial rights in the accreditation context. Having considered Plaintiff's contention that the Court should conduct a full damages trial, with a jury as factfinder, as well as Defendant's legal opposition to such request, the Court has determined that the scope and form of the trial is best interpreted and explained after first resolving the previously reserved summary judgment issues. Accordingly, set forth below are the Court's rulings as to: (A) the cross-motions for summary judgment on all issues other than bias; (B) whether money damages are an available remedy in this case if Plaintiff demonstrates at trial that it was denied the right to an impartial decisionmaker; and (C) whether Plaintiff is entitled to a jury trial on the issue of bias.

         A. Cross Motions for Summary Judgment

         1. Summary of Issues

         Excluding the issue of bias, the parties' dispute on summary judgment centers on whether Plaintiff: (1) received the correct remediation period to demonstrate that its graduation rate was compliant with NACCAS requirements; (2) received adequate notice regarding its alleged failure to maintain accurate internal records; and/or (3) received a full and fair opportunity to pursue an administrative appeal of the withdrawal decision. As to the second point, Plaintiff argues that Defendant did not withdraw Plaintiff's accreditation due to an actual graduation rate deficiency, but rather, improperly withdrew accreditation based on Plaintiff's failure to maintain accurate records without notifying Plaintiff in advance that accreditation could be withdrawn on such basis.

         2. Standard of Review

         a. Summary Judgment Standard

         The Federal Rules of Civil Procedure provide that a district court shall grant summary judgment in favor of a movant if such party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).[1] "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247-48 (1986).

         When confronted with cross-motions for summary judgment, "the court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal quotation marks and citation omitted). As to each motion, the Court must resolve factual disputes and competing rational inferences in favor of the non-movant. Id.

         b. Accreditation Review Standard

         As acknowledged by both parties, the Fourth Circuit's recent opinion in Prof'l Massage provides the standard governing this Court's review of NACCAS's decision to withdraw Wards Corner's accreditation. As explained by the Fourth Circuit, while accreditation agencies are not state actors, and are therefore "not subject to the strictures of constitutional due process requirements, " because such agencies are "quasi-public" and "wield enormous power over institutions-life and death power, some might say, " they owe a "common law duty ... to employ fair procedures when making decisions affecting their members." Prof'l Massage, 781 F.3d at 169-70 (citations omitted). Distilled to the simplest terms, the common law duty applicable to accreditation agencies requires decisionmakers "to play it straight." Id. at 170.

         In addition to establishing the legal duty owed by accreditation agencies, Prof'l Massage defines the scope of the Court's inquiry and the degree of judicial deference owed to an accreditation decision. Importantly, "recognition that ... a common law duty exists does not authorize courts to undertake a wide-ranging review of decisionmaking by accreditation agencies." Id. Rather, the proper scope of the fairness review authorizes reviewing courts "to consider only whether the decision of an accrediting agency such as [NACCAS] is arbitrary and unreasonable or an abuse of discretion and whether the decision is based on substantial evidence." Id. at 171 (citations omitted). A district court is therefore prohibited from substituting its judgment for that of the accrediting agency and may not "conduct a de novo review." Id. (citations omitted).

         When performing this deferential review, a district court should generally confine itself "to the record that was considered by the accrediting agency at the time of the final decision." Id. at 174-75. In the absence of a strong showing of bad faith or improper behavior, the Fourth Circuit has cautioned district judges not to extend the judicial review beyond the "procedural fairness" of the accreditation process.[2]

         See id. at 172 ("When adjudicating common law due process claims against accreditation agencies, courts should focus primarily on whether the accrediting body's internal rules provided a fair and impartial procedure and whether it followed its rules in reaching its decision.") (internal quotation marks and citation omitted).

         3. Summary Judgement Analysis

         a. Factual Summary

         With the exception of the bias/pecuniary interest issue, the parties are largely in agreement as to the relevant facts, which are established by the record before NACCAS at the time of its withdrawal decision. This Court incorporates herein the "undisputed facts" set forth in the agreed final pretrial order entered in this case. ECF No. 131, at 1-7. In short, the instant case arises out of Defendant's withdrawal of Plaintiff's accreditation as a cosmetology and barbering academy. On November 28, 2014, Wards Corner submitted its 2013 Annual Report to NACCAS, self-reporting that its graduation rate was below the required threshold of 50%, and further indicating that the length of the longest program taught by Wards Corner was 40 weeks in length. ECF No. 72-2. In late November and early December of 2014, Plaintiff received an email from NACCAS, followed by a letter, indicating that Wards Corner did not meet the required graduation rate, and that based on Plaintiff's report that its longest program was 40 weeks in length, Plaintiff had twelve months to rectify the deficiency. ECF Nos. 72-3, 72-4. Around the same time, Plaintiff requested that Defendant provide it with information on the process and requirements for correcting Wards Corner's 2013 graduation rate, and Defendant responded with an email that same day outlining the process. ECF No 72-5. NACCAS also provided Plaintiff with written notice of the steps necessary to achieve compliance through demonstrating a successful 2014 graduation rate, to include submitting a "Preliminary 2014 Annual Report" by April 15, 2015. ECF No. 72-4.

         The record documents that, during 2015, Plaintiff attempted, but according to Defendant failed, to effectively revise its reported 2013 graduation rate to reflect that it was actually in compliance. ECF Nos. 72-8, 73-2. Defendant, however, again encouraged Plaintiff to submit preliminary 2014 numbers and even extended the deadline for doing so. ECF No. 72-9. Notwithstanding such extension, Plaintiff failed to submit such data to NACCAS. ECF No. 73-1. Moreover, when the 2014 annual report was submitted by Plaintiff in the fall of 2015, and NACCAS determined that it failed to demonstrate a compliant 2014 graduate rate, NACCAS allowed Plaintiff additional time to submit supplemental information, [3] further notifying Plaintiff, in boldface text, that it had one, and only one, opportunity to submit a supplement seeking to correct the identified deficiencies. ECF No. 76-1.

         After receiving a supplement from Plaintiff in February of 2016, NACCAS made the decision to withdraw accreditation, later affirming such decision after a full appeals process. ECF Nos. 64-3, 72-1. Wards Corner's accreditation was withdrawn after NACCAS determined that Wards Corner failed to submit accurate annual report data, failed to maintain internal documentation that can be verified in support of its annual report, and failed to demonstrate compliance with the minimum graduation rate within the timeframes established by NACCAS. ECF Nos. 64-5, at 5; 77-1, at 6.

         b. Discussion

         Under the deferential Prof'l Massage standard, Plaintiff can succeed only by proving that the record from the accreditation review process demonstrates that NACCAS's decision to withdraw accreditation was "arbitrary and unreasonable or an abuse of discretion, " or was not "based on substantial evidence"; when analyzing Plaintiff's arguments, this Court is expressly prohibited from substituting its judgment for that of NACCAS. Prof'l Massage, 781 F.3d at 171 (citation omitted). Applying such deferential standard in this case, for the reasons stated in Defendant's summary judgment filings, the Court finds that the notice period, [4] the reason for withdrawal, [5] and the NACCAS appeals process, [6] all conformed with fundamental principles of fairness. This is not to say that Defendant acted without mistake throughout the process, ...


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