Dumas v. Kipp

• Decision Date: 23 July 1996
• Docket Number: No. 94-56146,94-56146
• Citation: 90 F.3d 386
• Parties: 111 Ed. Law Rep. 124, 96 Cal. Daily Op. Serv. 5411, 96 Daily Journal D.A.R. 8817 James DUMAS, Trustee in Bankruptcy of United College of Business, a corporation, Plaintiff-Appellant, v. Samuel KIPP, III, Executive Director; Robert-Peter F. Quider, Chief of Institutional Services, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 386

90 F.3d 386

111 Ed. Law Rep. 124, 96 Cal. Daily Op. Serv. 5411,

96 Daily Journal D.A.R. 8817

James DUMAS, Trustee in Bankruptcy of United College of

Business, a corporation, Plaintiff-Appellant, v. Samuel KIPP, III, Executive Director; Robert-Peter F.

Quider, Chief of Institutional Services,

Defendants-Appellees.

No. 94-56146.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Feb. 8, 1996.

Decided July 23, 1996.

Howard L. Horwitz, Oberstein, Doniger, Fetter, Kibre & Horwitz, Los Angeles, California, for plaintiff-appellant.

Jonathan R. Davis, Deputy Attorney General, Los Angeles, California, for defendants-appellees.

Appeal from the United States District Court for the Central District of California, Robert M. Takasugi, District Judge, Presiding. D.C. No. CV-92-07183-RMT.

Before WALLACE and T.G. NELSON, Circuit Judges, and BROWNING, ^* District Judge.

WALLACE, Circuit Judge:

Dumas, a trustee in bankruptcy of the United College of Business (College), appeals from the district court's dismissal without leave to amend of his third amended complaint. Dumas alleges that Samuel M. Kipp, III and Robert-Peter F. Quider, the Executive Director and Chief of Institutional Services, respectively, of the California Student Aid Commission (Commission), violated the Higher Education Act (Act) in their personal capacities. This statutory violation, Dumas argues, constitutes a violation of the College's constitutional rights. The district court exercised jurisdiction under 28 U.S.C. § 1331. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 1291, and we affirm.

I

The College operated a private vocational school in Los Angeles County, California. Its students were entitled to participate in the Supplemental Loans for Students Program (Program). The Program was created by the Higher Education Amendments of 1986, Pub.L. No. 99-498, Title IV, § 428A, 100 Stat. 1268, 1384 (codified at 20 U.S.C. § 1078-1). Prior to being repealed, see Omnibus Budget Reconciliation Act, Pub.L. No. 103-66, Title IV, § 4047(b), 107 Stat. 312, 364 (1993), the Program allowed "[g]raduate and professional students ... and undergraduate independent students" to borrow money, in addition to the money provided by other student loan programs. 20 U.S.C. § 1078-1(a)(1).

The Program only provided funds to students who were enrolled in an "eligible institution." The statute defined eligible institutions as those having a "cohort default rate" below thirty percent. 20 U.S.C. § 1078-1(a)(2). This rate refers to the percentage of current and former students who default on their loans when they enter their repayment period. 20 U.S.C. § 1085(m); see also 34 C.F.R. § 668.17(e)(1) (1994).

In early 1990, the Department of Education (Department) notified the College that its 1987 default rate exceeded the 30 percent statutory maximum, see 20 U.S.C. § 1078-1(a)(2), and discontinued the College students' access to program loans. The College successfully appealed from this decision to the Secretary of Education. The Department revised its findings, concluding instead that the College's 1988 cohort default rate was under 30 percent.

The Department is only one of several government and private entities that administer the Program. While commercial lenders actually provide funds to students, state agencies, or private entities specifically designated by the state, guarantee the loans and approve the commercial lenders. See generally 20 U.S.C. § 1078; 34 C.F.R. §§ 682.200(b), 682.207(b), 682.400 et seq. The State of California created its own instrumentality, the Commission, to assume this function. Cal. Educ.Code § 69761.5 (West Supp.1996). The Department reimburses the state agencies for any defaulted loans on which a guarantor agency was required to pay. The rate of Department reimbursement decreases as the default rate increases. 20 U.S.C. § 1078(c).

The Commission's actions, under the direction of Kipp and Quider, were not consistent with those of the Department. Although the Department's revised findings indicated that the College was eligible, Kipp and Quider, who may have been using a different calculation method, concluded that the College's cohort default rate was still too high. Under their authority, the Commission refused to guarantee Program loans to College students. The College alleges that as a direct result of the inability of its students to obtain loans, it lost substantial revenue. In the latter part of 1990, the College closed and declared bankruptcy.

On December 4, 1992, Dumas brought an action against Kipp, Quider, and the Commission. On April 6, 1993, he filed an amended complaint and on June 11, he filed his second amended complaint, which the district court dismissed with leave to amend on February 8, 1994. On March 21, Dumas filed his third amended complaint which was dismissed without leave to amend. The district court concluded that as a matter of law, Dumas did not state a section 1983 claim for violation of the Act. The district court's orders rejected Dumas's equal protection and procedural due process claims, but did not reach his First Amendment claim.

A dismissal without leave to amend receives de novo review. Polich v. Burlington Northern, Inc., 942 F.2d 1467, 1472 (9th Cir.1991). Such dismissals are appropriate when it is clear that the complaint cannot be saved by further amendment. Id.

II

The district court dismissed the second amended complaint, concluding that the Act was "intended to benefit students, rather than educational institutions[, and the Act] only indicates a preference for guaranteed loans, not a binding obligation." We should affirm if we conclude that schools like the College are not the intended beneficiaries of the Act and otherwise cannot maintain a section 1983 claim for violation of the Act's provisions.

In Maine v. Thiboutot, 448 U.S. 1, 4, 100 S.Ct. 2502, 2504, 65 L.Ed.2d 555 (1980), the Supreme Court held that section 1983 provides a claim for violations of federal statutes committed under color of state law. See also Boatowners and Tenants Ass'n v. Port of Seattle, 716 F.2d 669, 671 (9th Cir.1983) (Boatowners ). The Court has also recognized that not every statutory violation gives rise to a section 1983 action. Rather, section 1983 actions are available only when several conditions are met. Among the conditions potentially relevant here is that the statute at issue must create a justiciable right. Sometimes statutory language reflects a congressional preference or entreaty, not a right or obligation. See, e.g., Pennhurst State School & Hosp. v. Halderman, 451 U.S. 1, 18, 101 S.Ct. 1531, 1540, 67 L.Ed.2d 694 (1981). Also, some statutory language is too vague to create a right that courts can credibly adjudicate. Id. at 27, 101 S.Ct. at 1544; see also Suter v. Artist M, 503 U.S. 347, 363, 112 S.Ct. 1360, 1370, 118 L.Ed.2d 1 (1992) (Suter ) (holding that statutory language did "not unambiguously confer an enforceable right upon the Act's beneficiaries"). Congress must have intended the plaintiff, as opposed to the federal agency, to enforce the statutory language in contention. Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 520-24, 110 S.Ct. 2510, 2523-25, 110 L.Ed.2d 455 (1990) (Wilder ); Suter, 503 U.S. at 360-61, 112 S.Ct. at 1368-69; see generally Kenneth Culp Davis & Richard J. Pierce, Jr., Administrative Law Treatise, § 19.6 at 270 (3d ed.1994). Also, the court must decide whether the right created exists "to benefit the putative plaintiff." Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 106, 110 S.Ct. 444, 448, 107 L.Ed.2d 420 (1989) (internal quotation omitted).

We begin by asking whether the statute creates a right existing "to benefit the putative plaintiff." Id. If we hold that no such right exists, we need not determine whether the other requirements necessary to maintain a section 1983 action for violation of a federal statute are present. To focus on this initial issue, we will assume, without deciding, that the Act creates some sort of right and that this right is enforceable by individuals, as opposed to the Secretary of Education. Cf. Jackson v. Culinary School of Washington, 788 F.Supp. 1233, 1258 (D.D.C.1992) (Congress intended "to remove the Secretary's enforcement decisions from the scrutiny of courts"), vacated on different grounds, --- U.S. ----, 115 S.Ct. 2573, 132 L.Ed.2d 824 (1995).

To determine whether Congress intended a disputed statute to confer rights for plaintiff's "special benefit," Boatowners, 716 F.2d at 673, we examine first the statute's text and, if necessary, the legislative history. See id.; see also Arkansas Medical Society v. Reynolds, 6 F.3d 519, 525-26 (8th Cir.1993) (reviewing statutory text to determine whether plaintiff Medicaid providers and recipients could pursue a claim for violation of a Medicaid statute provision, 42 U.S.C. § 1396(a)(30)(A)).

Divining the intent of Congress is not always an easy task. But in this case, we have little difficulty. There is nothing in the Act that indicates a congressional intent to benefit owners of post-secondary schools or to provide them enforceable rights. Our reasoning follows.

First, the Act's language, including the provisions creating the Program at issue, does not speak of providing benefits to educational institutions. Rather, the language of the statute speaks of benefits to students. See, e.g., 20 U.S.C. § 1070(a) ("[i]t is the purpose of this part, to assist in making available the benefits of postsecondary education to eligible students"); § 1078-1(a)(1) ("students shall be eligible").

Second, the sections which Dumas alleges show a congressional intent to confer rights and benefits upon educational institutions cannot be fairly said to do so. For instance, Dumas cites 20 U.S.C. § 1078(c)(2)(F), which prohibits the guarantor agency from discriminating against borrowers on the basis of "race, sex, color, religion, national origin, age,...