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Professional Massage Training Ctr., Inc. v. Accreditation Alliance of Career Sch. & Colls.

United States Court of Appeals, Fourth Circuit

March 24, 2015

PROFESSIONAL MASSAGE TRAINING CENTER, INCORPORATED, a Missouri Corporation, Plaintiff - Appellee,
v.
ACCREDITATION ALLIANCE OF CAREER SCHOOLS AND COLLEGES, d/b/a Accrediting Commission of Career Schools and Colleges, a Virginia Corporation, Defendant - Appellant. ACCREDITATION REVIEW COMMISSION ON EDUCATION FOR THE PHYSICIAN ASSISTANT; ACCREDITATION COMMISSION FOR ACUPUNCTURE AND ORIENTAL MEDICINE; ACCREDITATION COUNCIL FOR PHARMACY EDUCATION; ACCREDITING BUREAU OF HEALTH EDUCATION SCHOOLS, INCORPORATED; ACCREDITING COMMISSION FOR COMMUNITY AND JUNIOR COLLEGES, WESTERN ASSOCIATION OF SCHOOLS AND COLLEGES; ACCREDITING COUNCIL FOR CONTINUING EDUCATION & TRAINING; ACCREDITING COUNCIL FOR INDEPENDENT SCHOOLS AND COLLEGES; AMERICAN COUNCIL ON EDUCATION; ASSOCIATION OF SPECIALIZED AND PROFESSIONAL ACCREDITORS; ASSOCIATION OF TECHNOLOGY, MANAGEMENT, AND APPLIED ENGINEERING; COMMISSION ON INSTITUTIONS OF HIGHER EDUCATION OF THE NEW ENGLAND ASSOCIATION OF SCHOOLS AND COLLEGES; COUNCIL FOR ACCREDITATION OF COUNSELING AND RELATED EDUCATIONAL PROGRAMS; COUNCIL FOR HIGHER EDUCATION ACCREDITATION; COUNCIL FOR PODIATRIC MEDICATION EDUCATION; COUNCIL ON EDUCATION FOR PUBLIC HEALTH; COUNCIL ON OCCUPATIONAL EDUCATION; DISTANCE EDUCATION AND TRAINING COUNCIL; MIDDLE STATES COMMISSION ON HIGHER EDUCATION, THE; NATIONAL ARCHITECTURAL ACCREDITING BOARD; SOUTHERN ASSOCIATION OF COLLEGES AND SCHOOLS COMMISSION ON COLLEGES; WESTERN ASSOCIATION OF SCHOOLS AND COLLEGES SENIOR COLLEGE COMMISSION; HIGHER LEARNING COMMISSION, Amici Supporting Appellant, AMERICAN COUNCIL OF TRUSTEES AND ALUMNI; THE JOHN WILLIAM POPE CENTER FOR HIGHER EDUCATION POLICY; JUDICIAL EDUCATION PROJECT, Amici Supporting Appellee. PROFESSIONAL MASSAGE TRAINING CENTER, INCORPORATED, a Missouri Corporation, Plaintiff - Appellant,
v.
ACCREDITATION ALLIANCE OF CAREER SCHOOLS AND COLLEGES, d/b/a Accrediting Commission of Career Schools and Colleges, a Virginia Corporation, Defendant - Appellee. ASSOCIATION OF SPECIALIZED AND PROFESSIONAL ACCREDITORS; ACCREDITING BUREAU OF HEALTH EDUCATION SCHOOLS, INCORPORATED; ACCREDITING COUNCIL FOR CONTINUING EDUCATION & TRAINING; ACCREDITING COUNCIL FOR INDEPENDENT SCHOOLS AND COLLEGES; COUNCIL ON OCCUPATIONAL EDUCATION; DISTANCE EDUCATION AND TRAINING COUNCIL; COUNCIL FOR HIGHER EDUCATION ACCREDITATION; ACCREDITING COMMISSION FOR COMMUNITY AND JUNIOR COLLEGES, WESTERN ASSOCIATION OF SCHOOLS AND COLLEGES; ACCREDITATION COUNCIL FOR PHARMACY EDUCATION; ASSOCIATION OF TECHNOLOGY, MANAGEMENT, AND APPLIED ENGINEERING; COUNCIL ON EDUCATION FOR PUBLIC HEALTH; COUNCIL FOR PODIATRIC MEDICATION EDUCATION; MIDDLE STATES COMMISSION ON HIGHER EDUCATION, THE; NATIONAL ARCHITECTURAL ACCREDITING BOARD; COMMISSION ON INSTITUTIONS OF HIGHER EDUCATION OF THE NEW ENGLAND ASSOCIATION OF SCHOOLS AND COLLEGES; SOUTHERN ASSOCIATION OF COLLEGES AND SCHOOLS COMMISSION ON COLLEGES; AMERICAN COUNCIL ON EDUCATION; ACCREDITATION REVIEW COMMISSION ON EDUCATION FOR THE PHYSICIAN ASSISTANT; COUNCIL FOR ACCREDITATION OF COUNSELING AND RELATED EDUCATIONAL PROGRAMS; WESTERN ASSOCIATION OF SCHOOLS AND COLLEGES SENIOR COLLEGE COMMISSION; ACCREDITATION COMMISSION FOR ACUPUNCTURE AND ORIENTAL MEDICINE, Amici Supporting Appellee, AMERICAN COUNCIL OF TRUSTEES AND ALUMNI; THE JOHN WILLIAM POPE CENTER FOR HIGHER EDUCATION POLICY; JUDICIAL EDUCATION PROJECT, Amici Supporting Appellant

Argued January 28, 2015

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Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. (1:12-cv-00911-LO-IDD). Liam O'Grady, District Judge.

ARGUED:

Craig C. Martin, Michael Anthony Scodro, JENNER & BLOCK, LLP, Chicago, Illinois, for Appellant/Cross-Appellee.

Matthew Lorn Hoppock, DUNN & DAVISON LLC, Kansas City, Missouri, for Appellee/Cross-Appellant.

ON BRIEF:

Sarah A. Palmer, JENNER & BLOCK, LLP, Chicago, Illinois, for Appellant/Cross-Appellee.

Ronald L. Holt, Julie G. Gibson, DUNN & DAVISON LLC, Kansas City, Missouri, for Appellee/Cross-Appellant.

Mary E. Kohart, Dean R. Phillips, Gregory S. Voshell, Michelle L. Modery, ELLIOTT GREENLEAF & SIEDZIKOWSKI, P.C., Blue Bell, Pennsylvania; Kenneth J. Ingram, Thomas Mugavero, WHITEFORD TAYLOR PRESTON, LLP, Washington, D.C.; Ada Meloy, AMERICAN COUNCIL ON EDUCATION, Washington, D.C., for Amici Accreditation Review Commission on Education for the Physician Assistant, Accreditation Commission for Acupuncture and Oriental Medicine, Accreditation Council for Pharmacy Education, Accrediting Bureau of Health Education Schools, Incorporated, Accrediting Commission for Community and Junior Colleges-Western Association of Schools and Colleges, Accrediting Council for Continuing Education & Training, Accrediting Council for Independent Schools and Colleges, American Council on Education, Association of Specialized and Professional Accreditors, Association of Technology, Management, and Applied Engineering, Commission on Institutions of Higher Education of the New England Association of Schools and Colleges, Council for Accreditation of Counseling and Related Educational Programs, Council for Higher Education Accreditation, Council for Podiatric Medication Education, Council on Education for Public Health, Council on Occupational Education, Distance Education and Training Council, Higher Learning Commission, The Middle States Commission on Higher Education, National Architectural Accrediting Board, Southern Association of Colleges and Schools Commission on Colleges, and Western Association of Schools and Colleges Senior College Commission.

Shannen W. Coffin, Jeffrey M. Theodore, STEPTOE & JOHNSON LLP, Washington, D.C., for Amici American Council of Trustees and Alumni, Judicial Education Project, and The John William Pope Center for Higher Education Policy.

Before WILKINSON, AGEE, and HARRIS, Circuit Judges. Judge Wilkinson wrote the opinion, in which Judge Agee and Judge Harris joined.

OPINION

Page 166

WILKINSON, Circuit Judge:

The Professional Massage Training Center (PMTC) brought this suit against the Accreditation Alliance of Career Schools and Colleges (ACCSC or the Commission) for violation of its due process rights after ACCSC denied the school's application for re-accreditation in 2010. Following a four-day bench trial, the district court awarded PMTC more than $400,000 in damages and reinstated the school's accreditation.

The proper standard of review of actions by private accrediting agencies considers only whether the accreditation decision was supported by substantial evidence or otherwise arbitrary and capricious. What the district court conducted here amounted to a de novo approach to the accreditation process that resulted in a wholesale substitution of the judgment of the court for that of the agency. Judged by the correct standard of review, the accreditation decision here was well supported, not arbitrary or capricious, and we thus reverse the judgment of the district court in that regard. We affirm, however, its dismissal of PMTC's state law claims for breach of contract, negligence, and tortious interference. We remand to the district court with directions to enter judgment in favor of ACCSC on PMTC's due process claim and to dismiss the case.

Page 167

I.

ACCSC is a non-profit, non-stock corporation established in Virginia that accredits private schools of higher education offering career-oriented programs. It is recognized by the Secretary of Education as an accrediting agency, see 20 U.S.C. § 1099b, and it accredits nearly 750 institutions nationwide. Accreditation, among other things, entitles educational institutions to access Title IV federal student aid funding. See 20 U.S.C. § § 1070 et seq. PMTC is a single-discipline massage therapy training school in Springfield, MO. It has been owned and operated by Juliet Mee since 1994. ACCSC first accredited the school in 2000 and renewed its accreditation in 2005. The case at bar arose from PMTC's application for renewal of accreditation in 2010.

ACCSC has set Standards of Accreditation that define both the process for schools to seek or renew accreditation as well as the substantive criteria schools must meet to be accredited. See J.A. 4729-4858. ACCSC's accreditation process begins when a school sends a full-time on-site management representative to an informational accreditation workshop, id. at 4747, which PMTC did in December of 2009, id. at 1448. The school then submits an application and a self-evaluation report. Id. at 4747-48. The application is followed by an on-site evaluation, led by a team from ACCSC, which then provides to the school a Team Summary Report.

The Team Summary Report is a factual report and summary of the team's compliance findings, and does not include any final recommendation for the Commission's action on accreditation. Id. at 4752. A team from ACCSC visited PMTC on August 9-10, 2010. The team was led by Michael Ackerman, the Director of ATI Enterprises, which operates for-profit career schools. Id. at 1455. The team also included other education and massage therapy professionals and ACCSC staffers Courtney Kiesel Moraites and Lisa Miles. Moraites, supervised by Miles, wrote the subsequent Team Summary Report issued on September 23, 2010. Id. The report detailed a number of areas of concern, including problems with management capability and retention of administrative staff, failures in strategic planning, lack of ongoing faculty assessment and professional development, failure to demonstrate adequate student achievement and employment rates, failure to comply with federal financial requirements, as well as deficiencies in the learning resource system and processes for verification of faculty credentials. See id. at 1460-64.

Pursuant to the ACCSC Standards, PMTC had 30 days to submit additional material in response to the report. It did so following a brief deadline extension, at which point the entire record was reviewed by a preliminary school action panel of three Commissioners, and then by the full Commission. See id. at 435-37. Within ACCSC, the Commission is composed of four public Commissioners and nine private Commissioners. Id. at 4848. Public Commissioners are those " [p]ersons with an interest and expertise in employment, education and training" who are not connected to an institution accredited by ACCSC. Id. Private, or School, Commissioners are " [p]roprietors or bona fide executives" of institutions accredited by ACCSC. Id. In December 2010, the Commission issued a Probation Order listing eleven areas in which PMTC had failed to establish compliance, and gave PMTC until March 2011 to respond and demonstrate improvements in areas of concern. Id. at 1781-91. PMTC submitted a response including documentation in March of 2011, seven days after the March 8 deadline. Id. at 1792-1867.

Page 168

In June 2011, the Commission notified PMTC that it had vacated the Probation Order, " defer[ing] final action on the school's Application for Renewal of Accreditation until the November 2011 meeting in order to provide PMTC with an additional opportunity to demonstrate compliance." Id. at 1868. ACCSC conducted a second on-site visit to focus on PMTC's Institutional Assessment and Improvement Plan (IAIP), specifically with regard to management issues, the learning resource system, faculty qualification verification, and financial stability. See id. at 1868-73.

The second on-site team was led by Mollie Hager and ACCSC staff member Lisa Miles. Id. at 1874. Miles wrote the Team Summary Report, which identified five areas in which PMTC was still failing to meet ACCSC Standards, specifically including management, learning resources, and faculty qualification verification. Id. at 1878-99. PMTC submitted a number of documents in response, and notably provided Miles with two binders full of documents as part of the on-site visit, which Miles took to her home and did not share directly with the Commission. In December 2011, following PMTC's submission, the Commission issued a second Probation Order instructing PMTC to provide evidence of compliance with accrediting standards on management continuity and capacity, institutional assessment and improvement activities, the learning resource system, and faculty qualifications and verification. Id. at 2156-67. PMTC submitted its response in January 2012. Id. at 2169-2373.

In February 2012, a school action panel met and recommended that ACCSC not renew PMTC's accreditation. The panel expressed concern with PMTC's continued compliance failures, especially relating to management turnover. Id. at 855, 858-60. The full Commission voted 12-0 not to renew accreditation on the grounds that PMTC had failed to demonstrate " continuity of management and administrative capacity," id. at 2377, had failed to bring the learning resource system into compliance with accrediting standards, and had failed to demonstrate compliance with standards on faculty qualifications and verification, id. at 2374-84. On April 5, 2012, PMTC appealed the denial decision to an independent ACCSC appeals panel, which affirmed the Commission's denial. Id. at 2574-92. The denial decision became final on July 11, 2012 and the Department of Education began withholding Title IV funds on July 27, 2012. Id. at 2574, 4030.

On August 16, 2012, PMTC filed a six-count complaint against ACCSC in the Eastern District of Virginia, sounding in common law due process, breach of contract, negligence and tortious interference with various business and contractual relations. The district court granted a preliminary injunction requiring ACCSC to reinstate PMTC's accreditation. In its Amended Complaint, PMTC added allegations of bias by ACCSC's staff against PMTC.

After a four-day bench trial, the court entered judgment in favor of PMTC, finding that ACCSC had violated the school's due process rights. It awarded the school $429,016.62 in damages, and ordered ACCSC to fully reinstate its accreditation, but dismissed the remaining state law claims. The court found that ACCSC's Standards were not clearly defined and did not provide guidance and metrics for schools to ascertain how to meet the Standards. In addition, it found the agency had violated PMTC's due process rights by denying accreditation ...


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