Pac. Coast Horseshoeing Sch., Inc. v. Kirchmeyer

• Citation: 961 F.3d 1062
• Decision Date: 10 June 2020
• Docket Number: No. 18-15840,18-15840
• Parties: PACIFIC COAST HORSESHOEING SCHOOL, INC.; Bob Smith; Esteban Narez, Plaintiffs-Appellants, v. Kimberly KIRCHMEYER, in her Official Capacity as Director of Consumer Affairs; Michael Marion, in his Official Capacity as Chief of the Bureau for Private and Postsecondary Education, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

961 F.3d 1062

PACIFIC COAST HORSESHOEING SCHOOL, INC.; Bob Smith; Esteban Narez, Plaintiffs-Appellants,

v.Kimberly KIRCHMEYER, in her Official Capacity as Director of Consumer Affairs; Michael Marion, in his Official Capacity as Chief of the Bureau for Private and Postsecondary Education, Defendants-Appellees.

No. 18-15840

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 24, 2019 San Francisco, California

Filed June 10, 2020

Paul V. Avelar (argued) and Keith E. Diggs, Institute for Justice, Tempe, Arizona; Bradley A. Benbrook and Stephen M. Duvernay, Benbrook Law Group PC, Sacramento, California; for Plaintiffs-Appellants.

P. Patty Li (argued), Deputy Attorney General; Paul Stein, Supervising Deputy Attorney General; Thomas S. Patterson, Senior Assistant Attorney General; Xavier Becerra, Attorney General; Attorney General's Office, San Francisco, California; for Defendants-Appellees.

Eugene Volokh (argued), Professor of Law, Scott & Cyan Banister First Amendment Clinic, UCLA School of Law, Los Angeles, California; Rodney A. Smolla, Dean & Professor of Law, Widener University, Delaware Law School, Wilmington, Delaware; for Amici Curiae Professors Jane Bambauer, David Bernstein, Clay Calvert, Mark Lemley, Rodney Smolla, and Eugene Volokh.

Seth E. Mermin and Cindy Pan, Center for Consumer Law and Economic Justice, Berkeley, California; Thomas Bennigson, Public Good Law Center, Berkeley, California; for Amici Curiae Housing and Economic Rights Advocates, Consumers Union, Project on Predatory Student Lending, and UC Berkeley Center for Consumer Law and Economic Justice.

Before: Michael J. Melloy,^* Jay S. Bybee, and N. Randy Smith, Circuit Judges.

OPINION

BYBEE, Circuit Judge:

Plaintiff Bob Smith is an experienced farrier and offers classes for those who would like to learn the art and craft of horseshoeing. Plaintiff Esteban Narez is experienced with horses and would like to enroll in Smith's classes to become a professional farrier. But because Narez does not have a high school diploma or GED, California's Private Postsecondary Education Act of 2009 ("PPEA" or "the Act") prohibits him from enrolling in Smith's courses unless Narez first passes an examination prescribed by the U.S. Department of Education. But if Smith were running a flight school or teaching golf, dancing, or contract bridge, Narez could enroll without restriction.

We are asked to decide whether the Act burdens plaintiffs’ free speech. The district court determined that the Act did not. We conclude that plaintiffs have stated a claim that the PPEA burdens their rights under the First Amendment. We therefore reverse and remand to the district court for further proceedings.

I. BACKGROUND

A. Statutory Framework

In the PPEA, Cal. Educ. Code § 94800 et seq. , the California legislature found that, as of 2013, more than 300,000 Californians were attending more than 1100 private postsecondary schools in California. Id . § 94801(a). The legislature acknowledged that such schools "can complement the public education system and help develop a trained workforce to meet the demands of California businesses and the economy." Id. § 94801(b). Nevertheless, the legislature expressed its "concern[ ] about the value of degrees and diplomas issued by private postsecondary schools," and found that the "lack of protections" for "consumers of those schools’ services" and the possibility of "fraudulent or substandard educational programs and degrees" demonstrated "the need for strong state-level oversight of private postsecondary schools." Id. § 94801(b), (d)(6).¹ To that end, California sought to ensure that students who enrolled in private postsecondary schools would actually benefit from such programs and regulate contracts between students and any "private entity with a physical presence in [California] that offers postsecondary education to the public for an institutional charge." Id. § 94858. The Act defines a category of students, known as "[a]bility-to-benefit student[s]," as those students "who do[ ] not have a certificate of graduation from a school providing secondary education, or a recognized equivalent of that certificate." Id. § 94811.

Any student wishing to enroll in a private postsecondary school must execute an enrollment agreement, signed by the student and an authorized employee of the school. Id. § 94902(a). Critically for this case, no "ability-to-benefit student may execute an enrollment agreement" unless "the institution shall have the student take an independently administered examination from the list of examinations prescribed by the United States Department of Education." Id. § 94904(a); see also Higher Education Act of 1965, 20 U.S.C. § 1091(d)(1)(A)(i). "[U]nless the student achieves a score ... demonstrating that the student may benefit from the education and training being offered," "[t]he student shall not enroll." Cal. Educ. Code § 94904(a).

The PPEA exempts certain courses and a number of private institutions from these requirements. For example, educational programs "sponsored by a bona fide trade, business, professional, or fraternal organization" are exempt, so long as the program is provided "solely for that organization's membership." Id. § 94874(b)(1). Also exempt are courses offering "avocational or recreational education programs"; "[t]est preparation for examinations required for admission to a postsecondary education institution," such as the SAT or ACT; "[c]ontinuing education or license examination preparation"; and "[f]light instruction." Id. § 94874(a), (d)(1), (j). Aside from subject-matter exemptions, the PPEA exempts various institutions, including "[a]n institution that does not award degrees and that solely provides educational programs for total charges of [$2500] or less." Id. § 94874(f).

B. Facts

Narez has an affinity for horses and, after working with a farrier, decided to enroll in the Pacific Coast Horseshoeing School, Inc. ("PCHS").² He chose horseshoeing as a career because it pays well and there are no licensing requirements for farriers in California. Narez does not have a high-school diploma or a GED and is considered an ability-to-benefit student under the PPEA.

PCHS is California's only full-time horseshoeing school. It charges $6000 for an eight-week course, which includes both classroom and hands-on learning. Smith, the owner of PCHS, teaches the course himself. Because academic prowess is not needed to be a good farrier, Smith is willing to teach and accommodate less-educated students. If he determines at the end of the first week that a student will not benefit from the course, he refunds all but $250 of the tuition. As a private postsecondary-educational institution teaching a vocational skill, PCHS is subject to the PPEA. Following inspection by the Bureau of Postsecondary Education, PCHS began declining admission to prospective students who did not have a high-school diploma or a GED or who had not passed an examination prescribed by the PPEA.

Narez alleges that no examination satisfying the ability-to-benefit requirement tests horseshoeing knowledge or skills. Because he works seven days a week, Narez does not want to forgo income to study for a test that has no relevance to horseshoeing. Absent the ability-to-benefit requirement, Narez alleges that he would enroll in PCHS and PCHS would accept him.

C. Procedural History

Smith, Narez, and PCHS filed this action challenging the ability-to-benefit requirement on First Amendment grounds. The defendants, two California-state officials ("California"), moved to dismiss the claim under Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion. Pac. Coast Horseshoeing Sch., Inc. v. Grafilo , 315 F. Supp. 3d 1195 (E.D. Cal. 2018). The court concluded that the ability-to-benefit requirement does not prohibit the imparting or disseminating of information. Instead, it determined that the law regulates only conduct—the forming of an enrollment agreement—and any burdens on speech were "incidental," resulting from the government's regulation of commercial transactions. Id. at 1200. The district court thus concluded that plaintiffs failed to allege a First Amendment claim. Id. at 1200–02. This appeal followed.³

II. DISCUSSION

The First Amendment, which is made applicable to the states through the Due Process Clause of the Fourteenth Amendment, provides: "Congress shall make no law ... abridging the freedom of speech." U.S. Const. amend. I. This case raises two interrelated questions. First, is the PPEA subject to First Amendment scrutiny at all? That is, does the Act regulate speech? Second, if the Act regulates speech, is it content based? The answers to these questions are critical because they determine the level of scrutiny with which courts will review the PPEA and its ability-to-benefit requirement.

Ordinarily, we review challenges to legislation regulating commercial transactions under a rational-basis standard: a statute is consistent with the Due Process Clause if the legislature has identified a legitimate state interest and the legislation has a rational basis for furthering that interest. See Pennell v. City of San Jose , 485 U.S. 1, 11–13, 108 S.Ct. 849, 99 L.Ed.2d 1 (1988) ; United States v. Carolene Prods. Co. , 304 U.S. 144, 152–53, 58 S.Ct. 778, 82 L.Ed. 1234 (1938) ; Retail Dig. Network, LLC v. Prieto , 861 F.3d 839, 847 (9th Cir. 2017) (en banc). When, however, the legislation burdens a fundamental right, such as the right to free speech, we must examine the legislation with more exacting or "heightened scrutiny." Turner Broad. Sys., Inc. v. FCC , 512 U.S. 622, 640–41, 114 S.Ct. 2445, 129 L.Ed.2d 497 (1994) ; Scheer v. Kelly , 817 F.3d 1183, 1189 (9th Cir. 2016).

This heightened scrutiny generally takes one of two forms: intermediate scrutiny or strict scrutiny. If legislation regulates conduct but incidentally burdens expression, we review that legislation under "intermediate scrutiny" to see whether it ...