Florida Coastal School of Law v. Cardona
3:21-cv-00721
M.D. Fla.Aug 9, 2021Background
- Florida Coastal School of Law (FCSL), owned by InfiLaw, sought recertification to participate in Title IV federal student-aid programs; Sterling Capital Partners (Sterling) formerly owned 98.6% of InfiLaw.
- InfiLaw had posted three letters of credit totaling $5,681,255 after prior sister schools closed and owed substantial liabilities to the Department of Education (Department).
- The Department issued a provisional Program Participation Agreement (PPPA) requiring FCSL and its owners (including Sterling) to sign and assume joint liability; Sterling refused and later forfeited its ownership interest. FCSL’s prior PPA expired March 31, 2021.
- FCSL applied for reinstatement; the Department denied reinstatement (May 13, 2021) and affirmed the denial (July 16, 2021), citing failing composite financial scores, breaches of fiduciary duty (misleading statements/omissions), and lack of administrative capability supported by ABA findings.
- The ABA approved a teach-out plan and restricted FCSL from admitting new students beyond summer 2021. FCSL sued under the APA and sought a preliminary injunction to restore Title IV eligibility.
- The district court denied the preliminary injunction, concluding FCSL had not shown substantial likelihood of success on the merits, and that material changes (Sterling’s forfeiture, ABA teach-out) and the record undermined effective restoration of the prior status quo.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Legality of requiring Sterling to sign PPPA (Sterling Decision) | Dept exceeded authority; may require owner liability only at end of provisional period and only if necessary to protect U.S. financial interest | Dept has broad §668.14 authority to impose conditions in a PPA; §1099c(e) limits apply to individuals not entities and §668.175(f)(3)(ii) is permissive | Court: Dept had authority and FCSL not likely to succeed; Sterling forfeiture and changed facts prevent relief |
| Denial of reinstatement—financial responsibility (composite score/LOC) | FCSL: Dept misread audited statements, should view FCSL in isolation and letters of credit provided sufficient security | Dept: consolidated InfiLaw financials showed failing composite score and LOCs secured multiple schools’ liabilities, offering little net protection | Court: Dept’s financial-responsibility finding was rational; FCSL unlikely to succeed |
| Denial of reinstatement—fiduciary duty/misrepresentation | FCSL: disclosures were routine; no regulation required reporting ABA findings; statements not materially misleading | Dept: as fiduciary FCSL had affirmative duty of candor; it made misleading affirmative statements and omitted material transactional details | Court: Dept reasonably concluded FCSL breached fiduciary duties; finding not arbitrary |
| Preliminary injunction relief / status-quo & timeliness | FCSL characterized relief as restoring status quo and said delay was harmless; imminent irreparable harm (closure) | Dept: FCSL waited months to sue; Sterling’s forfeiture and ABA teach-out changed status quo; mandatory injunction would be extraordinary | Court: Denied—FCSL failed to show substantial likelihood of success and cannot restore pre-expiration status quo |
Key Cases Cited
- Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) (governing preliminary injunction standard requiring likelihood of success and irreparable harm)
- Gonzalez v. Governor of Georgia, 978 F.3d 1266 (11th Cir. 2020) (preliminary-injunction factors and merging of equities/public-interest when government is defendant)
- Pittman v. Cole, 267 F.3d 1269 (11th Cir. 2001) (plaintiff must show substantial likelihood of success to obtain preliminary injunction)
- F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (APA review and scope of judicial review of agency procedure)
- Defenders of Wildlife v. U.S. Dep’t of Navy, 733 F.3d 1106 (11th Cir. 2013) (exceedingly deferential arbitrary-and-capricious standard)
- Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Eng’rs, 781 F.3d 1271 (11th Cir. 2015) (review requires agency to have examined relevant data and given reasoned explanation)
- Stone & Webster Constr., Inc. v. U.S. Dep’t of Labor, 684 F.3d 1127 (11th Cir. 2012) (when agency gives multiple independent grounds, one valid ground sustains the decision)
- Fla. Power & Light Co. v. Lorion, 470 U.S. 729 (1985) (remand to agency for further explanation is the usual course under APA review)