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William Loveland College v. Distance Education Accredition Commission

United States District Court, District of Columbia

September 28, 2018

WILLIAM LOVELAND COLLEGE, Plaintiff,
v.
DISTANCE EDUCATION ACCREDITION COMMISSION, Defendant.

          MEMORANDUM OPINION

          AMY BERMAN JACKSON UNITED STATES DISTRICT JUDGE.

         Plaintiff William Loveland College (“WLC” or “the College”) has brought this lawsuit against defendant Distance Education Accrediting Commission (“DEAC, ” “the agency, ” or “the Commission”).[1] DEAC is authorized by the United States Department of Education to accredit institutions that offer distance or online post-secondary degree programs. The College received accreditation from DEAC in 2001 to offer online education to students.

         In February 2017, DEAC issued a Show Cause Directive informing the College that it had concerns about the institution's ability to comply with DEAC's accreditation standards and policies, and ordering it to show cause why its accreditation should not be withdrawn. WLC's accreditation remained in effect in the interim, but it was directed to take corrective action in order to vacate the order, and it was required to file a new application for accreditation within thirty days.

         The College then brought this lawsuit in federal court alleging five causes of action: denial of due process (Count I); breach of contract (Count II); defamation (Count III); tortious interference with prospective business or economic advantage (Count IV); and negligence (Count V).[2] See Compl. ¶¶ 18-50. Because the College did not attempt to invoke the procedures or address any of the concerns outlined in the Show Cause Directive, its accreditation eventually lapsed.[3]

         Pending before the Court is DEAC's motion to dismiss. See Notice of DEAC's Mot. to Dismiss [Dkt. # 25-1] (“Def.'s Mot.”); DEAC's Mem. of Law in Supp. of Def.'s Mot. [Dkt. # 25-2] (“Def.'s Mem.”).[4] Because the College failed to exhaust its administrative remedies before bringing the due process claim, and because none of the state law counts states a claim upon which relief can be granted, the Court will grant defendant's motion.

         BACKGROUND

         Plaintiff is a not-for-profit degree-granting institution located in Loveland, Colorado, Compl. ¶¶ 1, 9. The College's original mission was to provide training in the emerging field of traffic management, but in 1996, it transitioned “to a distance based education model to leverage emerging technological opportunities” in education markets. Id. ¶ 9. Distance education or distance-based education is also commonly referred to as online education. See Id. ¶ 10.

         Defendant is a private, not-for-profit organization that operates as an institutional accreditor of distance education institutions. Compl. ¶ 10; see Distance Educ. Accrediting Comm'n, http://www.deac.org (last visited Sept. 5, 2018). It was first recognized by the United States Department of Education in 1959, and it continues to be an accreditor of “postsecondary institutions in the United States that offer degree and/or non-degree programs primarily by the distance or correspondence education method up to and including the professional doctoral degree.” Compl. ¶ 14; Accreditation in the United States, U.S. Dep't of Educ., https://www2.ed. gov/admins/finaid/accred/accreditation-pg6.html (last visited Sept. 26, 2018).

         I. Accreditation Procedures

         DEAC must comply with the Higher Education Act (“HEA”), 20 U.S.C. § 1001 et seq., the statute governing accrediting agencies, as well as Department of Education regulations. This framework requires each accrediting agency to maintain and make available to the public: written materials describing the accreditation process; the procedures institutions must follow to apply; the standards used to make accreditation decisions; the institutions and programs the agency currently accredits; and information about members of the agency's decision-making bodies and principal administrative staff. 20 U.S.C. § 1099b; 34 C.F.R. § 602.23(a). The agency must afford certain due process protections to each educational institution it accredits, which include, among other things, providing written statements of agency requirements and standards, written notice of any “adverse accrediting action or action to place the institution or program on probation or show cause, ” and an opportunity to appeal any adverse action prior to the action becoming final. 20 U.S.C. § 1099b(a)(6); 34 C.F.R. § 602.25. The accrediting agency must also have procedures in place for providing written notice about certain accrediting decisions to the public, the Secretary of Education, and the appropriate State licensing or authorizing agency. 20 U.S.C. § 1099b(a)(7)- (8); 34 C.F.R. § 602.26.

         To be accredited by DEAC, an institution has the burden of proving that it is in compliance with all of the standards set out in the agency's accreditation handbook. See Compl. ¶ 19; Decl. of Joshua N. Ruby in Supp. of DEAC's Mot., Ex. C to Def.'s Mot. [Dkt. # 25-3] (“Ruby Decl.”); DEAC Accreditation Handbook, Ex. 1 to Ruby Decl. [Dkt. # 25-3] (“Handbook”).[5] The Handbook is a manual published by DEAC that sets forth the requirements of accreditation, and member schools agree to be bound by those standards if they receive accreditation. Compl. ¶¶ 19, 33.

         The application process includes a self-evaluation by the applicant, a curricular review by DEAC-engaged subject matter specialists with an opportunity for the institution to respond, and an on-site evaluation of the institution's compliance with DEAC accreditation standards. Handbook at 12-20. Following the on-site evaluation, the Chair of the on-site team prepares a report, and the institution has thirty-days to submit a response. Id. at 19.

         The Commission usually meets twice a year, in January and June, to review applications for initial accreditation or renewal of accreditation. Handbook at 20. After reviewing all submitted materials, the Commission may take one of four courses of action: (1) accredit a new applicant institution for up to three years, or continue an institution's accredited status for up to five years; (2) defer a decision pending receipt of a Progress Report, submission of additional information, and/or the results of a follow-up-on-site evaluation; (3) direct the institution to Show Cause as to why its accreditation should not be withdrawn; or (4) deny accreditation to an applicant or withdraw accreditation from an accredited institution. Id. at 20-23.

         Of particular relevance to this case are the steps DEAC and the institution must take if the Commission decides to issue a Show Cause Directive to an institution. “In cases where the Commission has reason to believe that an institution is not in compliance with accreditation standards and other requirements, the Commission may direct the institution to Show Cause as to why its accreditation should not be withdrawn.” Handbook at 21. An institution must receive written notice of a Show Cause Directive, and the notice must: (1) state the reasons why the directive was issued; (2) identify the standards or accreditation requirements for which compliance is a concern; (3) recite the reasons for and the evidence supporting the claim that the institution may not be in compliance with accreditation requirements; and (4) advise the institution of its obligations under the directive and of the deadline for its response. Id. at 22.

         When an institution receives a Show Cause Directive, it is “required to demonstrate corrective action and compliance with accrediting standards or procedures.” Handbook at 21. The “burden of proof rests with the institution to demonstrate that it is meeting DEAC's accreditation standards.” Id. Once the time for an institution to respond or comply with the requirements in the directive has expired, the Commission may do one of four things: (1) vacate the Show Cause Directive if the response demonstrates that removal of the order is warranted or that the institution is in compliance with the cited accreditation standards and requirements; (2) continue the Show Cause Directive, pending the receipt of additional information or further institutional reports; (3) order a special visit to the institution; or (4) withdraw the institution's accreditation, an action “that would be subject to an appeal by the institution.” Id. at 22. The Commission must notify the institution of its decision within thirty days, and in all cases, the Commission must “allow the institution sufficient time to respond to any findings before making any final decision regarding the institution's accredited status.” Id. at 23.

         If the Commission decides to deny or withdraw accreditation, the institution has the right to appeal that decision by submitting an Application for Appeal to the Executive Director of the Commission. Handbook at 23-24. The institution must appeal within ten days of receipt of the letter advising it of the denial or withdrawal of accreditation, or the right to appeal will be deemed waived and the “Commission's action [will] become final.” Id. The institutional appeal “is heard by an independent appeals panel that is separate from the Commission and serves as an additional level of due process for the institution.” Id. at 24. The panel may affirm, remand, amend, or reverse the Commission's decision. Id. at 25-26.

         “Upon being notified that its appeal did not change an adverse Commission decision, an institution has five business days to request arbitration, during which no public notification of the Commission action will be made.” Handbook at 27. If the institution's arbitration proceeding is unsuccessful, and the accreditation decision becomes final, the institution may file suit in the District Court for the District of Columbia. Id. at 150 (“An institution which seeks to overturn an adverse arbitration decision, or to file suit against the Corporation for any other reason, must bring the suit in the Federal District Court for the District of Columbia.”); see also Id. at 20 (noting that a decision becomes final only after the time for requesting an appeal has expired or the appeal itself is denied).

         II. WLC's Application to Renew Accreditation

         Plaintiff received its first accreditation from DEAC in 2001.[6] Compl. ¶ 9. In the later proceedings relevant to this matter, the College filed an application to renew its accreditation, [7] see Pl.'s Opp. at 1, and DEAC began the process associated with reviewing the application pursuant to the Handbook's procedures.

         Plaintiff alleges that in September 2016, [8] a team of individuals conducted an on-site review of the College. Compl. ¶ 21. Then, at its meeting in January 2017, DEAC determined that the College did not meet its accreditation criteria. Show Cause Directive at 1. As a result, DEAC issued a Show Cause Directive in a letter dated February 27, 2017, asking the College to “show cause why its accreditation should not be withdrawn.” Id.; Compl. ¶ 27.

         The letter informed the College that the Show Cause Directive was “not an adverse action but a statement of concern . . . about the institution's ability to document compliance with DEAC's accreditation standards and policies.” Show Cause Directive at 1. It expressly stated that the “[a]ccreditation for WLC remain[ed] in effect during the period of Show Cause, ” id., and it outlined the corrective action the College needed to take within a twelve-month period in order to vacate the order. Show Cause Directive at 1-12; see also Handbook at 21-23. According to the order, WLC was required to submit a new application for accreditation by March 27, 2017, and the College was informed that the Commission's staff would then set up a Fall 2017 visit. Show Cause Directive at 2.

         The DEAC announced the issuance of the Show Cause Directive on its website within twenty-four hours of giving notice to the College.[9] See Compl. ¶ 19 (alleging that the show cause letter was published); Ex M. to Compl. [Dkt. # 2-14] (screenshot of website listing William Loveland College as an institution that had received a show cause directive); see also Def.'s Mem. at 3; Pl.'s Opp. at 2.

         WLC responded to the Show Cause Directive via email on March 9, 2017, and it disagreed with many of the concerns the Commission had identified. Compl. ¶ 40; Ex. N to Compl. [Dkt. # 2-15] (“Email Exchange”). The College undertook to provide a “clear and accurate timeline of what actually transpired” in its past in the hope that DEAC would withdraw the Show Cause Directive and grant reaccreditation. See Compl. ¶ 40; Email Exchange. It also requested a response from the DEAC by March 17, 2017 so that it would have enough time to file the reaccreditation paperwork by March 27, 2017. See Email Exchange. On March 17, 2017, the Executive Director of DEAC, Leah Matthews, responded to the College's email and explained that the Show Cause Directive was not based on previously approved changes that had taken place throughout the College's history. See Id. She reiterated that the Commission “found that the institution did not meet accreditation standards, ” and that WLC's new application was due on March 27, 2017. Id.

         On March 19, 2017, WLC emailed DEAC and accused the agency, and Matthews specifically, of making false statements in the Show Cause Directive. See Compl. ¶ 40; Email Exchange. Matthews responded by email a few days later, stating that the College had made “a very, very serious accusation.” See Compl. ¶ 40; Email Exchange. She informed WLC that for that reason, she had been recused from the matter, and DEAC's legal counsel and members of the Executive Committee would contact the institution. See Compl. ¶ 40; Email Exchange. The College expressed frustration with Matthews' recusal, complaining that it had “exhausted almost every avenue giving [DEAC] all of the accurate data, ” and that it needed DEAC's continued cooperation so that it could meet the March 27, 2017 renewal application deadline. See Email Exchange.

         Although the complaint provides no additional facts, WLC states in its brief that at that point, it “decided not to continue with the process, ” and that it filed this lawsuit instead. Pl.'s Opp. at 2; see also Def.'s Mem. at 5 (“Instead, without responding to the Show Cause Directive and without availing itself of its procedural rights under the Handbook, WLC filed this lawsuit . . . .”).

         The complaint includes five causes of action:

• Count 1 - Denial of Due Process and Failure to Apply DEAC Standards
• Count 2 - Breach of Contract
• Count 3 - Defamation
• Count 4 - Tortious Interference with Prospective Business or Economic Advantage
• Count 5 - Negligence (in alternative to Breach of Contract)

         Count I alleges that by issuing a public Show Cause Directive to the College, DEAC violated federal laws and regulations, as well as its own protocols, because the “standard practice is to defer any negative findings” until another team visits the school. Compl. ¶ 19. According to the College, DEAC violated the school's right to due process when it “skipped these steps[, ] . . . [and] did not provide the College with any time to address the myriad of alleged defects [it] claimed to find.” Id.

         Count II alleges that after WLC applied and received accreditation and continued to pay annual dues to DEAC, the parties “agreed to be bound by DEAC's Standards of Accreditation as set forth in its handbook, as a formal contract.” Compl. ¶¶ 33-35. According to the College, “DEAC materially breached the contract by . . . refusing to apply its standards of accreditation to the school in a fair and impartial manner, ” and by issuing the Show Cause Directive, “which was based upon unverified false data and was replete with defamatory falsehoods.” Id. ¶ 37.

         The College also brings a defamation claim in Count III, alleging that the Show Cause Directive was “false and defamatory, ” and that the publication of the directive caused the College to “incur damages to its reputation” as well as a loss of good will and other monetary damages. Compl. ¶¶ 46-47.

         Count IV alleges that DEAC willfully and intentionally interfered with the College's business by issuing, and making public, the Show Cause Directive. Compl. ¶¶ 49-50. The College claims that “DEAC knew, or should have known, that by issuing its fraudulent public Show Cause Letter, it would materially impact the current and future prospects of the College by inhibiting student enrollment, revenue collection, staff recruitment, and donations.” Id. ¶ 49.

         Finally, as an alternative to the breach of contract claim, Count V alleges negligence. Compl. ¶¶ 52-56. According to the complaint, DEAC had “a legal duty to fairly and properly consider the College's application for reaccreditation, ” and it “breached its duties” when it “relied on the phony, fraudulent and defamatory fact finding” of its site-visiting team, and then published the Show Cause Directive. Id. ¶¶ 53-54.

         In its prayer for relief, the College asked for a “preliminary injunction” against DEAC requiring it to rescind the Show Cause Directive and/or remove it from its website, [10] and it requested a permanent injunction requiring DEAC to follow all of the procedures set forth in its Handbook. Compl. at 26-27 (demand for relief). In addition, plaintiff asks the Court to award it compensatory, consequential, and punitive damages. Id.

         STANDARD OF REVIEW

         “To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In Iqbal, the Supreme Court reiterated the two principles underlying its decision in Twombly: “First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. And “[s]econd, only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679, citing Twombly, 550 U.S. at 556.

         A claim is facially plausible when the pleaded factual content “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. A pleading must offer more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action, ” id., quoting Twombly, 550 ...


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