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McGlothian v. Fralin

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

January 23, 2019

JONATHAN MCGLOTHIAN, et al., Plaintiffs,
v.
W. HEYWOOD FRALIN, et al., Defendants.

          REPORT & RECOMMENDATION ON DEFENDANTS' MOTION TO DISMISS THE AMENDED COMPLAINT AND PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

          Roderick C. Young, United States Magistrate Judge.

         Jonathan McGlothian, Tracy McGlothian, and the Mt. Olivet Group, LLC (collectively, "Plaintiffs") bring this action against W. Heywood Fralin, H. Eugene Lockhart, Henry Light, Ken Ampy, Rosa Atkins, Marge Connelly, Victoria D. Harker, Stephen Moret, William Murray, Carlyle Ramsey, Minnis E. Ridenour, Tom Slater, Katharine M. Webb, and Peter Blake (collectively, "Defendants" or "SCHEV") in their official capacity as leaders and members of the State Council of Higher Education for Virginia ("SCHEV"), alleging violations of their rights under the First and Fourteenth Amendments of the United States Constitution, This matter is before the Court pursuant to 28 U.S.C. § 636(b) (1) (B) for a Report and Recommendation on Defendants' Motion to Dismiss for Failure to State a Claim ("Motion to Dismiss") (ECF No. 20) under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and Plaintiffs' Motion for Preliminary Injunction (ECF No. 4). The motions have been fully briefed and are ripe for review. The Court dispenses with oral argument because the materials before the Court adequately present the facts and legal contentions, and argument would not aid the decisional process at this stage. E.D. Va. Loc. Civ. R. 7 (J) . For the reasons set forth below, the undersigned RECOMMENDS that Defendants' Motion to Dismiss be DENIED and Plaintiffs' Motion for Preliminary Injunction be DENIED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure instruct that the Court accept as true a plaintiff's well-pleaded allegations, viewing all facts and drawing all reasonable inferences in the light most favorable to him. T. G. Slater & Son, Inc. v. Donald P. & Patricia A. Brennan, LLC, 385 F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). Applying these standards, the following facts are established for the purpose of the Motion to Dismiss and will be considered for purposes of the Motion for Preliminary Injunction.

         A. JONATHAN AND TRACY MCGLOTHIAN'S COURSES AT THE MT. OLIVET GROUP

         Plaintiff Jonathan McGlothian teaches project management classes through contracts with private companies and military units. (Am. Compl. ¶ 5.) The Project Management Institute, a private-sector professional body, is the largest certification body for the project management profession. (Id. ¶ 17.) The Project Management Institute's primary certification is the Project Management Professional ("PMP") certificate, which signals proficiency in project management, (Id. ¶¶ 17, 18.) To sit for the PMP certification test, candidates must have completed thirty-five hours of project management education and possess either: (a) a college degree and 4, 500 hours of experience leading and directing projects; or (b) a high school diploma and 7, 500 hours of experience leading and directing projects. (Id. ¶ 20.)

         Jonathan McGlothian teaches project management classes through the entity he co-founded with his wife, Tracy McGlothian-The Mt. Olivet Group, LLC ("TMOG"). (Id. ¶ 26). Within TMOG, there are multiple educational programs, specifically the TMOG Learning Center and Virginia Beach Sewing Solutions. (Id. ¶¶ 28, 43.) Jonathan and Tracy McGlothian are the sole owners of TMOG; Jonathan McGlothian serves as its President, and Tracy McGlothian is the Vice-President. (Id. ¶¶ 26, 42.) TMOG operates the TMOG Learning Center, through which Jonathan McGlothian prepares candidates for the PMP exam through a thirty-five hour course spread over five days of instruction. (Id. ¶ 28). Because the Project Management Institute recognizes TMOG as a registered educational provider, PMP candidates can use Jonathan McGlothian's course to satisfy the PMP certification requirement that they complete thirty-five hours in project management education. (Id.)

         In addition to the PMP test-preparation course, Jonathan McGlothian teaches other courses on project management, including courses titled "Project Management Fundamentals," "Project Management Essentials," "Practical Project Management Training," and "Leadership Skills." (Id. ¶ 29.) He teaches courses to prepare students for other Project Management Institute certification exams, including tests to become a Certified Associate in Project Management and Agile Certified Practitioner. (Id. f 30.) In addition to test preparation, he also teaches general project management skill classes. (Id. ¶ 31.)

         Tracy McGlothian, an experienced seamstress, manages Virginia Beach Sewing Solutions, a custom sewing and embroidery operation within TMOG. (Id. ¶¶ 41, 43.) In this role, she trains employees to use commercial-grade sewing machines through contracts with employers. (Id. ¶ 43.) She also teaches classes training students how to sew as a hobby. (Id. ¶ 44.)

         The TMOG Learning Center has never offered degrees of college credit, accepted student loans, or received federal Department of Education funds for any of the McGlothians' classes. (Id. ¶¶ 40, 47.) Jonathan McGlothian teaches his project management classes only through contracts with military units and private employers. (Id. ¶¶ 34, 35.) Tracy McGlothian teaches her commercial sewing courses only through contracts with private employers (id. ¶ 43), and teaches students solicited from the public only how to sew as a hobby (id. ¶ 44, 45) .

         B. THE CHALLENGED STATUTES

         Plaintiffs seek injunctive relief against enforcement of Va. Code §§ 23.1-213 to 23.1-228 and 8 Va. Admin. Code §§ 40-31-10 to 40-31-320 (collectively, the "Vocational School Law'') .

         SCHEV is Virginia's coordinating body for higher education established "to advocate for and promote the development and operation of an educationally and economically sound, vigorous, progressive, and coordinated system of higher education in the Commonwealth . . . ." Va. Code § 23.1-200.[1] SCHEV regulates private postsecondary schools, which include programs of academic, vocational, and continuing professional education with curricula designed for students with a high school diploma or its equivalent, or for students who are beyond the age of compulsory high school attendance, and for which tuition or a fee is charged. Va. Code § 23.1-213; 8 Va. Admin. Code § 40-31-10. "Postsecondary school" does not include basic adult educational programs or avocational programs, which are instructional programs not intended to prepare students for employment but are intended solely for recreation or as a hobby, or courses that prepare individuals to teach such pursuits. Va. Code § 23.1-213; 8 Va. Admin. Code § 40-31-10. SCHEV is responsible for creating and enforcing the procedures to ensure that postsecondary schools meet the minimum standards in their operations. Va. Code § 23.1-215(A).

         In furtherance of its statutory duties, SCHEV requires postsecondary schools that solicit students from the public to obtain certification to operate in the Commonwealth once the school obtains a valid business license. Va. Code § 23.1-217. The certification criteria for career-technical schools include, inter alia: providing information and documentation concerning a school's admission requirements, maintenance of student records and financial records, and the school's refund policy for tuition, 8 Va. Admin. Code § 40-31-160; determining that a school's courses, curriculum, and instruction are of sufficient quality, content, and length to adequately achieve a school's stated objective, id. § 40-31-150; and, determining that the faculty have appropriate educational backgrounds for their areas of instruction and appropriate professional certification or licensure, if appropriate in that field, id. In the certification application, a postsecondary school must: provide SCHEV with the results of an annual audit, id. § 40-31-160(H)(1); demonstrate that it creates transcripts for students and contracts with a third-party school or records maintenance organization to preserve such transcripts in the event that the school closes, id. § 40-31-160(E)(2); demonstrate that students have access to an "adequate and appropriate" library, id. § 40-31-160(M); create publicly available documents, brochures and catalogues detailing a variety of information regarding the school, id. § 40-31-160 (B), (C), (D), (F), (J); and, allow SCHEV to conduct random audits of its programs to verify compliance with the regulatory scheme, id. § 40-31-200(A). Postsecondary schools must pay a $2, 500 application fee, id. § 40-31-260 (D), as well as submit a surety instrument with SCHEV in an amount equal to the total tuition that the school collects, § 40-31-160(1), 40-31-160(B) (3) . SCHEV will certify a school only after it has conducted a physical examination of its facilities. Id. § 40-31-130 (D) .

         SCHEV exempts certain schools, programs, degrees, diplomas, and certificates from its certification process. Id. § 40-31-60. Professional programs for professional or occupational training offered to the extent the program is subject to approval by a regulatory board pursuant to Title 54.1 are exempt. Id. Also exempt are nursing education programs at schools that are subject to approval by the Virginia Board of Nursing, id., theological education, continuing-education classes, preparation for professional-practice and educational tests, among others. See Va. Code § 23.1-226 (B); 8 Va. Admin. Code §§ 40-31-40 - 40-31-60. Certification is not required if the school teaches courses offered "solely on a contractual basis for which no individual is charged tuition and there is no advertising for open enrollment." Va. Code § 23.1-226(B)(6).

         Applicants denied certification or an exemption from certification can request a fact-finding, administrative review of SCHEVs determination under the Virginia Administrative Process Act. 8 Va. Admin. Code §§ 40-31-220, 40-31-70. Administrative hearings are conducted by an independent hearing officer appointed by the Supreme Court of Virginia, and the hearing officer's determinations can be further appealed or reviewed by an independent administrative appeal panel. Id. Violations of SCHEVs regulations may be punishable as a Class 1 misdemeanor; each course or program offered in violation constitutes a separate offense. Va. Code § 23.1-228; 8 Va. Admin. Code § 40-31-230. As a Class 1 misdemeanor, violations are punishable by up to one year of incarceration, $2, 500 in criminal fines, and a civil fine of $1, 000 per violation for a maximum total of $25, 000 civil fine per year. Va. Code §§ 18.2-11(a), 23.1-228(A), 23.1-228(B).

         C. PLAINTIFFS' ATTEMPTS AT SCHEV CERTIFICATION

         Jonathan McGlothian attended a SCHEV orientation workshop for new schools in March 2016 to learn about SCHEVs postsecondary school certification process. (Am. Compl. ¶ 48.) Plaintiffs applied for SCHEV certification of the TMOG Learning center as a "career technical" school in November 2016 (the "2016 Application"). (Id. ¶ 49.) In the 2016 Application, Plaintiffs proposed a seventy-hour project management program taught by Jonathan McGlothian and a sewing, embroidery, and life skills program taught by Tracy McGlothian. (Id. ¶¶ 50, 51.) Plaintiffs spent more than one-hundred hours completing the 2016 Application and paid SCHEV $2, 500 in application fees. (Id. ¶¶ 52, 53.) To prepare for the 2016 Application, Plaintiffs rented commercial property for classroom space to meet SCHEV s criterion and spent more than twenty-thousand dollars on rent payments, furniture, and fixtures. (Id. ¶ 53.)

         On December 28, 2016, SCHEV informed Plaintiffs that their application package was incomplete and sent a letter including SCHEVs "initial assessment," listing the deficiencies and the additional information required to complete the application. (Id. ¶ 54; Ex. 5, ECF No. 21-4).) Plaintiffs resubmitted their SCHEV application on March 16, 2017 and included additional requested information (the “2017 Application"). (Am. Compl. ¶ 56.) The 2017 Application also totaled hundreds of pages, and the McGlothians spent dozens of hours completing it. (Id. ¶ 57.) SCHEV informed Plaintiffs that the 2017 Application was unsatisfactory. (Id. ¶ 58.) Accordingly, Plaintiffs withdrew from the SCHEV application process. (Id. ¶ 59.)

         On September 27, 2017, Plaintiffs sent a letter and an application to SCHEV seeking an exemption from SCHEV certification on behalf of the TMOG Learning Center under Va. Code § 23.1-226(B)(9), which exempts from regulation "[t]utorial instruction delivered and designed to . . . prepare an individual for an examination for professional practice or higher education." (Id. ¶ 61.) By letter dated October 30, 2017, SCHEV denied Plaintiffs' exemption application as the project management classes and PMP preparation courses were not considered "professional practice." (Id. ¶¶ 63, 64.) SCHEV informed Plaintiffs that they would need SCHEV certification to offer programs that prepare individuals for project management certification tests. (Id. ¶ 66.)

         On November 29, 2017, Jonathan McGlothian again sought a statutory exemption from SCHEV certification on behalf of the TMOG Learning Center. (Id. ¶ 67.) On December 18, 2017, SCHEV again denied the request. (Id. ¶ 68.) Plaintiffs no longer wish to apply for SCHEV certification but would like to teach project management test preparation, project management classes, and vocational sewing to students solicited from the public. (Id. ¶¶ 70-72.)

         On July 23, 2018, Plaintiffs filed the instant action praying that the Court enjoin SCHEV from enforcing the Vocational School Law against Plaintiffs, allowing them to solicit students from the public without certification. Plaintiffs received a letter dated August 9, 2018 from SCHEVs Director of Private Postsecondary Education, Sylvia Rosa-Casanova, accusing them of running an illegal postsecondary school, threatening criminal charges against them, and informing them that SCHEV would refer their matter to the Virginia Attorney General's Office to institute a civil proceeding against them. (Id. ¶¶ 95, 97.) The letter included a copy of an August 9, 2018 letter SCHEV sent to Virginia Beach's Commissioner of the Revenue requesting that the city revoke TMOG's business license. (Id. ¶ 96.) Plaintiffs sent a reply letter to SCHEV objecting to its content. (Id. ¶ 99.) Senior Assistant Attorney General Allen Wilson sent Plaintiffs' counsel an August 17, 2018 letter on SCHEVs behalf, wherein he claimed that SCHEV was statutorily required to seek the revocation of Plaintiffs' business license but that he would halt the enforcement procedures once SCHEV received documentation showing that Plaintiffs were not violating SCHEVs regulations. (Id. ¶¶ 99-100.)

         Plaintiffs provided SCHEV with sworn declarations that they do not offer classes to students solicited from the public and were in full compliance with SCHEV s regulations. (Id. ¶ 101.) SCHEV requested further information regarding Plaintiffs' statements on their website on August 22, 2018. (Id. ¶ 102.) SCHEV rescinded its enforcement proceedings against Plaintiffs and informed the City of Virginia Beach Commissioner of the Revenue that Plaintiffs were in compliance with the Vocational School Law on August 28, 2019. (Id. ¶ 103.)

         II. STANDARDS OF REVIEW

         A. MOTION TO DISMISS UNDER RULE 12(B) (1)

         "Because Defendant [s] ha[ve] filed both a Motion to Dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) and a Motion to Dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), the challenge to subject matter jurisdiction asserted in the motion under Rule 12(b)(1) must be addressed first," James v. United States, 143 F.Supp.3d 392, 394 (E.D. Va. 2015) (citing Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 548 (4th Cir.2006)).

         A party may file a motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction. "In determining whether jurisdiction exists, the district court is to regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment. Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). The plaintiff bears the burden of establishing that federal jurisdiction is proper. Piney Run Preservation Ass'n v. Cnty. Comm'rs of Carroll City/ 523 F.3d 453, 459 (4th Cir. 2008).

         B. MOTION TO DISMISS UNDER RULE 12(B) (6)

         "A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Dismissals under Rule 12(b)(6) are generally disfavored by the courts because of their res judicata effect. Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1471 (4th Cir. 1991). The Federal Rules of Civil Procedure only require that a complaint set forth "xa short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (omission in original) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level," "detailed factual allegations" are not required to satisfy the pleading requirement of Federal Rule 8(a)(2). Id. (emphasis added). In considering a motion to dismiss for failure to state a claim, a plaintiff's well-pleaded allegations are assumed to be true, and the complaint is viewed in the light most favorable to the plaintiff. Mylan Labs., 7 F.3d at 1134; see also Martin, 980 F.2d at 952.

         C. MOTION FOR PRELIMINARY INJUNCTION

         " [A] preliminary injunction is 'an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.'" Perry v. Judd, 471 Fed.Appx. 219, 223 (4th Cir. 2012) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008)). Such remedy is "never awarded as of right." Winter, 555 U.S. at 24. "[G]ranting a preliminary injunction requires that a district court, acting on an incomplete record, order a party to act, or refrain from acting, in a certain way." Hughes Network Sys., Inc. v. InterDigital Commc'ns Corp., 17 F.3d 691, 693 (4th Cir. 1994). Therefore, preliminary injunctions are "to be granted only sparingly." Toolchex, Inc. v. Trainor, 634 F.Supp.2d 586, 590-91 (E.D. Va. 2008) (quoting In re Microsoft Corp. Antitrust Litig., 333 F.3d 517, 524 (4th Cir. 2003)).

         To be eligible for a preliminary injunction, the party seeking such relief must demonstrate each of the following factors: (1) the likelihood of success on the merits; (2) the likelihood of irreparable harm in the absence of preliminary injunctive relief; (3) the balance of equities between the parties tips in favor of the party seeking such relief; and, (4) the public interest. Winter, 555 U.S. at 20; Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 346 (4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010), reinstated in relevant part, 607 F.3d 355 (4th Cir. 2010). Plaintiffs, as the party seeking a preliminary injunction, bear the burden of establishing that each factor supports granting the injunction. Real Truth, 575 F.3d at 346. Each factor must be demonstrated by a "clear showing." Winter, 555 U.S. at 22. The failure to show any one of the relevant factors mandates denial of the preliminary injunction. Real Truth, 575 F.3d at 346.

         "Ordinarily, preliminary injunctions are issued to 'protect the status quo and to prevent irreparable harm during the pendency of a lawsuit . . . [so as] to preserve the court's ability to render a meaningful judgment on the merits.'" Perry, 471 Fed.Appx. at 223 (quoting In re Microsoft Corp. Antitrust Litig., 333 F.3d at 525). Mandatory injunctive relief, however, alters the status quo by commanding or requiring a party to perform a positive act. Mandatory preliminary injunctive relief "is disfavored, and warranted only in the most extraordinary circumstances." Id. (citing In re Microsoft Corp. Antitrust Litig., 333 F.3d at 525). Here, Plaintiffs ask the Court to require Defendants to take a positive act to change by status quo by allowing Plaintiffs to solicit students from the public for their vocational skills classes without having obtained SCHEV certification, as required by the Vocational School Law. “[A] mandatory preliminary injunction must be necessary both to protect against irreparable harm in a deteriorating circumstance created by the defendant and to preserve the court's ability to enter ultimate relief on the merits of the same kind." In re Microsoft Corp. Antitrust Litig., 333 F.3d at 526. Therefore, the Court treats Plaintiffs' Motion for Preliminary Injunction with increased caution because it requests mandatory relief.

         III. ...


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