Parks School of Business, Inc. v. Symington

• Citation: 51 F.3d 1480
• Decision Date: 11 April 1995
• Docket Number: No. 93-16877,93-16877
• Parties: 99 Ed. Law Rep. 744 PARKS SCHOOL OF BUSINESS, INC., dba Parks College, a New Mexico corporation, Plaintiff-Appellant, v. Fife SYMINGTON; Roy A. Nicholson; Sally Hein, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1480

51 F.3d 1480

99 Ed. Law Rep. 744

PARKS SCHOOL OF BUSINESS, INC., dba Parks College, a New Mexico corporation, Plaintiff-Appellant, v. Fife SYMINGTON; Roy A. Nicholson; Sally Hein, et al Defendants-Appellees.

No. 93-16877.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 16, 1995.

Decided April 11, 1995.

David O. Drake, Salt Lake City, Utah, for plaintiff-appellant.

Richard A. Segal and Gust Rosenfeld, Phoenix, AZ, for USAF defendants-appellees.

Michael G. Prost and Thomas J. Dennis, Asst. Attys. Gen., Phoenix, AZ, for defendant-appellee Symington.

Appeal from the United States District Court for the District of Arizona.

Before: NORRIS, WIGGINS and FERNANDEZ, Circuit Judges.

FERNANDEZ, Circuit Judge:

Parks School of Business appeals the district court's dismissal of its complaint against Arizona Governor Fife Symington, United Student Aid Funds, and various of its officials for failure to state a claim. ¹ It also contends that if dismissal was proper, it should have been without prejudice so that Parks could file an amended complaint revising its allegations that the defendants unconstitutionally terminated Parks' participation in a federal student loan guarantee program. We affirm in part, reverse in part, and remand.

BACKGROUND

Parks, a private junior college, is a New Mexico corporation. Although its main place of business is in Albuquerque, New Mexico, it also has a campus in Tucson, Arizona, the site involved in this litigation.

Since 1981, USAF, doing business as Arizona Education Loan Program, has been Arizona's designated guarantor of student loan programs. All of USAF's government funding comes from the federal government. ² USAF manages and operates a program for the guarantee of loans made by participating lenders on behalf of Arizona residents and others who are attending eligible institutions of higher learning in the State of Arizona. Parks contends that it was at all times relevant to this action an eligible institution by virtue of its ongoing participation agreement with the Secretary of the U.S. Department of Education. See 20 U.S.C. Sec. 1094.

On or about February 18, 1992, USAF terminated Parks' participation in the Arizona loan guarantee program. Parks had been part of the program since 1989. On August 10, 1992, Parks filed this action. The complaint was amended to its current form on September 2, 1992. Parks alleged that by terminating its participation in the program without a hearing, USAF had denied Parks due process under the Fifth and Fourteenth Amendments and had violated 42 U.S.C. Sec. 1983. It further alleged that the actions were taken in violation of the Equal Protection Clause and 42 U.S.C. Sec. 1981 because most of Parks' students are minorities. Parks sought damages and injunctive and declaratory relief from various defendants. It also sought relief from Governor Symington because he had signed an agreement with USAF that designated it as the loan fund guarantor in Arizona.

Governor Symington filed a motion to dismiss, as did USAF. Parks filed a motion for partial summary judgment. On January 25, 1993, the district court held a hearing on the motions to dismiss, at which time it orally granted them. In dismissing the complaint, the court found that the Higher Education Act (HEA) does not provide a private right of action to parties in Parks' position. It also ruled that no action or conduct complained of had taken place under color of state law. It did not directly address the Sec. 1981 claim. The district court filed its final order granting the motions to dismiss with prejudice on September 1, 1993, and this appeal followed.

JURISDICTION AND STANDARD OF REVIEW

The district court had jurisdiction pursuant to 28 U.S.C. Sec. 1331. We have jurisdiction under 28 U.S.C. Sec. 1291.

A dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) is a ruling on a question of law and as such is reviewed de novo. Everest & Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir.1994). We take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party. Id. A complaint should not be dismissed unless a plaintiff could prove no set of facts in support of his claim that would entitle him to relief. Id. When a plaintiff has attached various exhibits to the complaint, those exhibits may be considered in determining whether dismissal was proper without converting the motion to one for summary judgment. Cooper v. Bell, 628 F.2d 1208, 1210 n. 2 (9th Cir.1980).

DISCUSSION

A. Private Right of Action Under the Higher Education Act

There is no express right of action under the HEA except for suits brought by or against the Secretary of Education. See 20 U.S.C. Sec. 1082(a)(2). The district court found that no private right of action for educational institutions to sue loan guarantors was implied in the statute. We agree.

In determining whether a federal statute confers an implied right of action, we apply the four-factor test enunciated by the Supreme Court in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). See also Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 508 n. 9, 110 S.Ct. 2510, 2517 n. 9, 110 L.Ed.2d 455 (1990) (distinguishing Cort test, used to determine whether a private right of action is implied in a federal statute, from analysis used to determine whether suit may be brought under 42 U.S.C. Sec. 1983 for the violation of a particular federal statute).

First, we consider whether the plaintiff is one of the class for whose especial benefit the statute was enacted. Second, we examine legislative history to see if we can discern any intent either to create or to deny a right of action under the statute. Third, we weigh whether implying a right of action would be consistent with the purposes of the legislative scheme. Finally, we determine whether the cause of action is one traditionally relegated to state law, so that it would be inappropriate to infer a cause of action based solely on federal law. See Cort, 422 U.S. at 78, 95 S.Ct. at 2088.

These factors are not given equal weight; the critical inquiry is congressional intent. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 377-78, 102 S.Ct. 1825, 1838-39, 72 L.Ed.2d 182 (1982). Moreover, we have recognized that before a private cause of action may be inferred from a statute, "ineluctable inferences [must] arise from the Act to compel such a finding." Miscellaneous Serv. Workers Local # 427 v. Philco-Ford Corp., 661 F.2d 776, 781 (9th Cir.1981). If the statute itself provides "a particular remedy or remedies," we should not add others. Id. (citation omitted).

The first Cort factor does not help Parks. Clearly, the HEA was enacted to benefit students. See 20 U.S.C. Secs. 1070(a), 1071(a)(1). It is true that the Act itself recognizes that one primary method of helping students is to "provid[e] assistance to institutions of higher education." Id. Sec. 1070(a)(5). Nonetheless, schools are not among the class for whose especial benefit the statute was enacted. See Saint Mary of the Plains College v. Higher Educ. Loan Program, Inc., 724 F.Supp. 803, 807 (D.Kan.1989).

Parks fares no better under the second and third factors, which blend together to some extent in this case. The legislative history behind the HEA is silent on the issue of private rights of action. Id. When a statute expressly provides for particular means of enforcement, we must be chary of reading additional ones into it. See Transamerica Mortgage Advisors v. Lewis, 444 U.S. 11, 19-20, 100 S.Ct. 242, 247, 62 L.Ed.2d 146 (1979); see also Assassination Archives & Research Ctr. v. Department of Justice, 43 F.3d 1542, 1543-45 (D.C.Cir.1995) (declining to read a private right of action into the JFK Act because Congress provided for specific remedies in the statute); Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1131-32 (9th Cir.1994) (declining to read a private right of action into the Federal Credit Union Act in part because Congress provided for particular remedies in the statute).

In Sec. 1082, the Secretary of Education is given wide-ranging authority to enforce the provisions of the Act. That includes avenues of redress for the alleged violations of the Act complained of by Parks. See 20 U.S.C. Sec. 1082(g)(1)(A), (h)(3); see also id. Sec. 1094(c). Furthermore, the statute expressly contemplates the very problem involved here. Section 1094 of the Act governs how a school becomes an eligible institution in order to be able to participate in programs governed by the Act. After the Secretary has determined an institution to be eligible, a guarantee agency may nonetheless terminate or impose limitations on the school's eligibility under Sec. 1078(b)(1)(T), as apparently happened here. Then, according to Sec. 1082(h)(3)(A), the Secretary conducts a review of the limitation or termination imposed by a guaranty agency--such as USAF--upon an eligible institution--such as Parks. That review is pursuant to the requirements of the Administrative Procedure Act, 5 U.S.C. Secs. 556 and 557. The Secretary has created a procedural scheme for that review, see 34 C.F.R. Secs. 682.713, 668.86 et seq., and, of course, judicial review follows, see 20 U.S.C. Sec. 1082(a)(2); see also Continental Training Servs., Inc. v. Cavazos, 893 F.2d 877, 892 (7th Cir.1990); Pro Schools, Inc. v. Riley, 824 F.Supp. 1314 (E.D.Wis.1993). If Parks believed that it had been slighted at any point in this process, its remedy was to sue the Secretary.

It is this extensive web of enforcement mechanisms that both illuminates congressional intent and tips the third Cort factor against Parks. As the court noted in Saint Mary of the Plains, 724 F.Supp. at 808:

In light of the extensive enforcement authority given to the Secretary under this program, this court is convinced that Congress intended this mechanism to...