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

United States Court of Appeals, Fourth Circuit

April 30, 2019

WARDS CORNER BEAUTY ACADEMY, a Virginia Corporation, Plaintiff - Appellant,
v.
NATIONAL ACCREDITING COMMISSION OF CAREER ARTS & SCIENCES, Defendant-Appellee.

          Argued: March 20, 2019

          Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Mark S. Davis, Chief District Judge. (2:16-cv-00639-MSD-LRL)

          William A. Lascara, PENDER & COWARD, Virginia Beach, Virginia, for Appellant.

          Julia Kim Whitelock, GORDON REES SCULLY MANSUKHANI, LLP, Washington, D.C., for Appellee.

          Before KEENAN and DIAZ, Circuit Judges, and DUNCAN, Senior Circuit Judge.

          DUNCAN, Senior Circuit Judge.

         Plaintiff-Appellant Wards Corner Beauty Academy ("WCBA") appeals the district court's dismissal of its case following a bench trial. After the National Accrediting Commission of Career Arts and Sciences ("NACCAS") withdrew WCBA's accreditation as a barbering and cosmetology academy, WCBA filed suit against NACCAS alleging due process violations in the accreditation proceeding and seeking injunctive and declaratory relief. On appeal, WCBA challenges the district court's dismissal of its due process claims based on three alleged violations: first, that one Commissioner had an impermissible pecuniary interest in the outcome of the decision; second, that NACCAS's alleged failure to follow its own conflict of interest rules violated WCBA's due process rights; and third, that the Commissioners reviewing WCBA's accreditation prejudged the decision by acting as both investigators and adjudicators. For the following reasons, we affirm.

         I.

         NACCAS is a non-profit corporation organized under the laws of Virginia. It is recognized by the United States Department of Education as a national accrediting agency, see 20 U.S.C. § 1099b(f), and is responsible for granting and reviewing accreditation for institutions such as WCBA.

         WCBA is a cosmetology and barbering institution in Virginia. WCBA was first accredited in 1977 by NACCAS's predecessor, the Cosmetology Accrediting Commission, and its accreditation was continuously renewed until 2014. This case arises from NACCAS's decision to withdraw WCBA's accreditation in 2014.

         NACCAS maintains Rules of Practice and Procedure (the "NACCAS Rules") as well as Standards and Criteria that define both the process for schools to renew accreditation and the substantive criteria they must meet to maintain accreditation. Pursuant to these requirements, schools must maintain a benchmark graduation rate of at least fifty percent. Each accredited school must submit an annual report of aggregated student data to demonstrate compliance with the benchmark graduation rate. If NACCAS determines that a school has not met the benchmark graduation rate, the school must bring itself into compliance with the NACCAS Rules. Should a school fail to do so, NACCAS may take adverse action, including placing the school on probation or withdrawing the school's accreditation. A school may appeal such adverse action to an Appellate Review Panel.

         In November 2014, WCBA submitted its 2013 Annual Report to NACCAS reporting a graduation rate below the fifty percent benchmark. NACCAS informed WCBA that it had twelve months to bring its graduation rate into compliance. WCBA submitted its 2014 Annual Report to NACCAS in the fall of 2015, at which point NACCAS determined that WCBA had failed to demonstrate a compliant graduation rate. Nonetheless, NACCAS permitted WCBA to submit supplemental information demonstrating that its graduation rate was in fact compliant. WCBA submitted this information in January 2016.

         In February 2016, NACCAS held a week-long Commission Meeting at which the NACCAS Commission considered and voted upon numerous school actions, including WCBA's accreditation. A day or two before the Commission votes on a school action (e.g., WCBA's accreditation), its File Review Teams, each comprised of three Commissioners, independently investigate the school action in question and make a recommendation to the full Commission. As part of this process, File Review Teams consider written reports prepared by NACCAS's Compliance Department staff. NACCAS staff assigns case files to the File Review Teams, who do not know which school actions they will investigate until they meet on the designated day. After the File Review Teams submit their recommendations, the full Commission convenes to discuss and then vote on the various school actions.

         At the February 2016 Commission Meeting, the Chairman of the Commission, Michael Bouman, presided over the Commission Meeting by calling the agenda items and moderating the discussion. Bouman also personally participated in reviewing WCBA's file as part of the File Review Team process. Typically, as Chairman, Bouman would not have been assigned to a File Review Team. Because one of the File Review Teams was missing a member, however, Bouman filled in as a substitute. Bouman's File Review Team was tasked with determining whether to recommend that the full Commission withdraw WCBA's accreditation.

         Bouman was also the President, Chief Operating Officer ("COO"), and part owner of Empire Education Group, Inc. ("EEG"), which operated a school near WCBA.[1] The district court later determined that at the time of the Commission Meeting, Bouman was unaware of a potential conflict between WCBA and EEG. He had no prior dealings with WCBA, nor was he aware of the geographic proximity between the two schools. Consequently, he did not recuse himself.

         Upon reviewing the WCBA file, Bouman's File Review Team recommended that NACCAS withdraw WCBA's accreditation. In doing so, Bouman personally signed the "action form" recommending that the full Commission vote to withdraw accreditation. Subsequently, the full Commission considered WCBA's case and unanimously voted to withdraw WCBA's accreditation. As Chairman, Bouman did not participate in the discussion before the full Commission, nor did he vote on the matter, though he was present in the room. WCBA appealed the decision in May 2016 to an Appellate Review Panel, which affirmed the decision in October 2016.

         WCBA then sued in federal district court, asserting that it was denied its common law right to due process in the NACCAS accreditation proceedings and requesting injunctive and declaratory relief. Specifically, WCBA contended that Bouman's involvement in the proceedings--given his purported pecuniary interest in their outcome ...


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