United States District Court, W.D. Kentucky, Louisville Division
ST. CATHARINE COLLEGE, INC. PLAINTIFF
JOHN B. KING, JR., in his Official Capacity as Acting Secretary of the United States Department of Education; and KATHY FEITH, in her Individual Capacity as an employee of the United States Department of Education DEFENDANTS
MEMORANDUM OPINION AND ORDER
N. Stivers, Judge.
matter is before the Court on Defendants' Motions to
Dismiss (DN 24, 35). For the reasons stated below, the
motions are GRANTED.
STATEMENT OF FACTS
lawsuit arises from claims asserted by Plaintiff Saint
Catharine College (“SCC” or “the
College”) against the Department of Education
(“DOE”) and its personnel arising from the
alleged illegally withholding of federal student aid. (Compl.
¶¶ 1-2, DN 1). Until it ceased operations in July
2016, SCC was a private college located in central Kentucky
accredited by the Southern Association of Colleges and
Schools Commission on Colleges (“SACS”). (Compl.
¶ 14). During the relevant time period, SCC was
provisionally certified to participate in relevant federal
student aid (“FSA”) programs under Title IV of
the Higher Education Act (“HEA”), 20 U.S.C.
§ 1001 et seq. (Compl. ¶ 16).
January 2012, SCC entered into a Program Participation
Agreement (“2012 PPA”) with the
(Compl. ¶ 21). The 2012 PPA incorporated the
then-current version of 34 C.F.R. § 600.20 in a
“Substantial Changes Provision.” (Compl.
¶¶ 22-25). Both the 2012 PPA and 34 C.F.R. §
600.20 required SCC to obtain the Secretary's approval to
“[a]dd a location at which the institution offers or
will offer 50 percent or more of an educational program . . .
.” 34 C.F.R. § 600.20(c)(1) (2012).
2011 and 2014, SCC added five new bachelor programs: (1)
Bachelor of Science on Radiation Therapy; (2) Bachelor of
Science in Radiologic Technology; (3) Bachelor of Art in
Farming and Ecological Agrarianism; (4) Bachelor of Science
in Farming and Ecological Agrarianism; and (5) Bachelor of
Science in Athletic Training (collectively, “the
2011-2014 programs”). (Compl. ¶¶ 20, 26-28).
Following the addition of these programs, in June 2014, SCC
timely applied for recertification with the DOE, and a School
Participation Team based in the DOE's Kansas City school
participation division (“KCSPT”) conducted site
visits in January and February 2015. (Compl. ¶ 32).
the first site visit, the DOE advised SCC that it would be
subject to “heightened cash monitoring”
(“HCM-2”) pursuant to 34 C.F.R. §
668.162(d). Heightened cash monitoring requires a
participating institution to disburse FSA funds to students
and seek reimbursement from the DOE, instead of the standard
funding protocol under which the DOE provides the funds
directly to the students. See 34 C.F.R. §
668.162(d). Within months of the site visits and SCC's
placement on HCM-2, SCC replaced its President, its entire
senior leadership team, substantially all of the staff in the
business and financial aid offices, and a Director of
Compliance position. (Compl. ¶ 34).
Kathy Feith (“Feith”) is a program reviewer with
the DOE. (Compl. ¶ 35). Following the site visits, she
advised SCC that the DOE “considered [the 2011-2014
programs] to fall within the scope of the 2012 Substantial
Changes Provision.” (Compl. ¶ 35). As alleged by
SCC, it explained why the 2011-2014 programs were not a
substantial deviation from SCC's already established
educational programs, but Feith requested documentation
showing that SACS had approved the 2011-2014 programs.
(Compl. ¶¶ 37-38). SCC provided a letter from SACS
to the DOE explaining that the 2011-2014 programs were within
SCC's accreditation, but Feith was not satisfied with
this letter because it did not contain the specific dates
that the 2011-2014 programs were approved. (Compl.
¶¶ 38-39). SCC then provided another letter from
SACS “explaining in detail the accreditation process
and that neither SACS nor SCC considered the [2011-2014
programs] to be a substantial change from SCC's
educational programs, and identifying the dates that each of
the [2011-2014 programs] was approved.” (Compl. ¶
then convened a panel in the summer of 2014 to review the
eligibility of the 2011-2014 programs. (Compl. ¶¶
41-42). Feith asserted that she would argue SCC's case
regarding the 2011-2014 programs; SCC requested permission to
attend the hearing, which Feith denied. (Compl. ¶ 42).
On July 27, 2015, the DOE's Kansas City school
participation division alerted SCC that it “had
rejected SCC's efforts to satisfy [the DOE's] . . .
demand to obtain the Secretary's approval” for the
2011-2014 programs. (Compl. ¶¶ 43-44). The director
of the DOE's Kansas City school participation division
also carbon-copied this statement to SACS and to the Kentucky
Council on Postsecondary Education. (Compl. ¶ 44).
in April 2015, SCC began submitting reimbursement requests to
the DOE in accordance with its placement on HCM-2. (Compl.
¶ 49). Per Feith's directive, SCC did not request
reimbursement for students enrolled in the 2011-2014
programs. (Compl. ¶ 49). On April 16, 2015, SCC
submitted its first request for $253, 288 in FSA. (Compl.
¶ 52). The DOE initially rejected the entire amount,
citing four reasons for the rejection, including failure to
make the required monetary match of the Federal Supplemental
Educational Opportunity Grant program (“FSEOG”).
(Compl. ¶ 54). SCC addressed these issues and
resubmitted the request. (Compl. ¶ 54). The DOE
reimbursed SCC for all but $5, 500 of the requested funds for
two students coded as majors of a pre-2011-to-2014 program,
e.g., pre-Athletic Training. (Compl. ¶ 55).
21, 2105, SCC made a second submission for FSA funds in the
amount of $601, 384. (Compl. ¶ 59). The DOE paid a
portion of the submission, but denied the portion associated
with: (1) students who were “formally undecided but
interested in one of the [2011 to 2014 programs]”; and
(2) students who were coded as a “pre-” some
program other than the 2011 to 2014 programs, e.g.,
pre-Nursing. (Compl. ¶ 65). SCC alleges that this
constituted a departure from the April 2015 submission in
which the DOE reimbursed SCC for FSA funds given to students
in these categories. (Compl. ¶¶ 66-67). Ultimately,
and with Feith's knowledge, SCC began coding all students
previously coded “pre-program” as
“undecided.” (Compl. ¶ 78).
7, 2015, SCC made a third reimbursement request to the DOE in
the amount of $613, 183. (Compl. ¶ 79). The DOE paid the
requested amount in full, which included reimbursement for
FSA given to twenty-eight students coded as
“undecided.” (Compl. ¶¶ 81-82). On
September 3, 2015, SCC made a fourth submission for
reimbursement in the amount of $805, 184 to the DOE, which
the DOE paid in full. (Compl. ¶¶ 84, 87). The
reimbursement included amounts of FSA disbursed to thirty-six
students coded as “undecided.” (Compl. ¶
October 9, 2015, SCC made a fifth submission to the DOE,
which included a request for reimbursement in the amount of
$741, 415 for FSA distributed to thirty-four students coded
as “undecided.” (Compl. ¶¶ 89, 91). The
DOE denied reimbursement in the amount of $182, 623 for the
thirty-four “undecided” students. (Compl. ¶
92). The DOE explained that, “[a]ccording to the open
program review, there is still an issue with the students in
the ‘undecided' program. These records have been
rejected pending review from the lead reviewer
[Feith].” (Compl. ¶ 93 (internal quotation marks
omitted)). As alleged by SCC, Feith explained that “she
would no longer approve students who were formally undecided
but who had, on their enrollment forms, expressed an interest
in perhaps someday pursuing one of the 2011 to 2014 Bachelor
Programs . . . .” (Compl. ¶ 99). Ultimately,
however, the DOE paid the entirety of the fifth submission,
explaining that the rejection of reimbursement for the
thirty-four “undecided” students “had . . .
all been a mix-up . . . .” (Compl. ¶ 103).
November 18, 2015, SCC sent a sixth submission to the DOE
requesting reimbursement in the amount of $869, 375. (Compl.
¶ 108). Five days later, the DOE notified SCC that it
had been assigned a new payment analyst. (Compl. ¶ 110).
The new analyst notified SCC on December 1, 2015, that she
required certain documents, and SCC responded that the DOE
already had those documents which had been provided for the
previous reimbursements. (Compl. ¶¶ 111-112). In
response, the DOE notified SCC on December 8, 2015, that it
would be conducting an on-site visit for the purpose of
reviewing the November 18, 2015, submission. (Compl. ¶
113). SCC attempted to convince the DOE to begin the site
visit in a quicker timeframe than it offered initially, but
was unsuccessful. (Compl. ¶¶ 115-117). The site
visit ultimately began on January 11, 2016, and lasted four
days. (Compl. ¶ 121). SCC resubmitted the November 18,
2015, submission on January 15, 2016. (Compl. ¶ 122). On
February 11, 2016, the DOE paid $320, 293 of the $869, 375
requested. (Compl. ¶ 123).
were a number of reasons the DOE cited for the denial of the
requested aid, all of which “with a very few possible
exceptions, ” according to SCC were resolved. (Compl.
¶¶ 126-129). These included conflict over FSEOG and
federal work study (“FWS”) reimbursement,
resulting in the loss of $40, 000 due to the ending of the
FSEOG program for the 2014-2015 academic year, and failure to
reimburse SCC for the FWS aid distributed in the 2015-2016
academic year. (Compl.¶¶ 141-149).
January 19, 2016, SCC and the DOE entered into the 2016 PPA.
(Compl. ¶ 150). Following a site visit, the DOE issues a
Program Review Report (“PRR”), to which the
institution may respond, and ultimately the DOE issues a
Final Program Review Determination. (Compl. ¶ 154). As
of the filing of the Complaint on February 22, 2016, the DOE
had not issued a PRR. (Compl. ¶ 155). On June 1, 2016,
SCC announced that it would be closing at the end of the July
2016. (Def.'s Reply Mot. Dismiss Ex. 1, DN 40-1).
Court has previously denied SCC's motion for preliminary
injunction as moot. (Order, DN 44). Defendants have moved to
dismiss all claims asserted against them. (Def.'s Mot.
Dismiss, DN 24; Def.'s Mot. Dismiss, DN 35).
action arises under the laws of the United States and the
Court has jurisdiction under 28 U.S.C. § 1331.
STANDARD OF REVIEW
standards for dismissal under Fed.R.Civ.P. 12(b)(1) and
12(b)(6) differ in the Sixth Circuit. See RMI Titanium
Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th
Cir. 1996). Threshold challenges to subject matter
jurisdiction under Fed.R.Civ.P. 12(b)(1) should generally be
decided before any ruling on the merits under Fed.R.Civ.P.
12(b)(6). See Bell v. Hood, 327 U.S. 678, 682
(1946). In most circumstances, a plaintiff bears the burden
to survive Fed.R.Civ.P. 12(b)(1) motions to dismiss for lack
of subject matter jurisdiction. See id.
to subject matter jurisdiction come in several varieties.
Facial attacks challenge a plaintiff's establishment of
jurisdiction in their complaint and require the court to
examine the jurisdictional basis. See United States v.
Ritchie, 15 F.3d 592, 598 (6th Cir. 1994) (citation
omitted). Factual attacks contest the existence of factual
prerequisites to jurisdiction. See Id. In such
motions, in contrast to motions under Fed.R.Civ.P. 12(b)(6),
the district court is empowered to resolve the factual
disputes affecting any jurisdictional prerequisites. See
Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th
Cir. 1986). A plaintiff bears the burden in both of these
situations. See Bell, 327 U.S. at 682.
immunity may also serve as a basis for a Fed.R.Civ.P.
12(b)(1) motion to dismiss for lack of jurisdiction. See
Muniz-Muniz v. U.S. Border Patrol, 741 F.3d 668, 671
(6th Cir. 2013). “‘[W]hile the Eleventh Amendment
is jurisdictional in the sense that it is a limitation on the
federal court's judicial power, ' the defense
‘is not coextensive with the limitations on judicial
power in Article III.'” Nair v. Oakland Cty.
Cmty. Mental Health Auth., 443 F.3d 469, 474 (6th Cir.
2006) (citing Calderon v. Ashmus, 523 U.S. 740, 745
n.2 (1998)). “[U]nlike subject-matter jurisdiction,
‘the entity asserting Eleventh Amendment immunity has
the burden to show that it is entitled to
immunity.'” Id. (citation omitted).
analyzing challenges under Fed.R.Civ.P. 12(b)(6) “must
construe the complaint in the light most favorable to
plaintiff . . . .” League of United Latin Am.
Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007)
(citation omitted). Courts must also accept all of a
plaintiff's allegations as true. See Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009). Mere “labels and
conclusions, and a formulaic recitation of the elements of a
cause of action's elements” are insufficient.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). However, this standard is satisfied when a plaintiff
“pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678