USA English Language Center v. Accrediting Council for Cont, 19-2308

Background

USA English Language Center (USAELC) sued the Accrediting Council for Continuing Education and Training (ACCET) after ACCET denied USAELC’s reaccreditation application, alleging due process violations, breach of contract, and negligence.
USAELC attached ACCET’s December 2018 denial letter to its amended complaint and alleged that it had substantially complied with ACCET standards, that ACCET staff and reports were biased, and that the denial was unsupported by the agency record.
The district court granted ACCET’s Rule 12(b)(6) motion and dismissed USAELC’s complaint, relying on the attached denial letter and concluding ACCET’s decision was supported by substantial evidence and was not arbitrary or capricious.
On appeal USAELC argued the district court (1) failed to accept USAELC’s allegations as true and improperly treated the attached agency decision as adopted by USAELC, and (2) conflated the pleading standard with the substantive substantial-evidence review required for due process claims against accrediting agencies.
The Fourth Circuit vacated and remanded, holding the district court erred by treating the factual statements in ACCET’s denial as true and by resolving the substantial-evidence question at the 12(b)(6) pleading stage without a more developed record; the panel expressed no view on the merits.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court properly treated an attached, defendant-prepared agency decision as adopted by the plaintiff at the pleading stage	USAELC: the complaint contested the denial letter; it did not adopt the agency’s factual findings and attached the letter for other purposes	ACCET: the denial letter was part of the complaint record and its contents can be relied on to negate USAELC’s claims	Held: The court erred; under Goines the district court must consider the nature/purpose of an attached document before treating its factual statements as true
Whether the district court correctly applied the substantial-evidence/arbitrary-and-capricious standard from Pro. Massage at the Rule 12(b)(6) stage	USAELC: applying a record-based substantial-evidence inquiry at pleading stage improperly conflates pleading sufficiency with the plaintiff’s ultimate evidentiary burden	ACCET: Pro. Massage sets the substantive standard for judicial review of accrediting decisions and courts must ensure decisions are supported by substantial evidence	Held: The district court improperly resolved the substantial-evidence question at the pleading stage; that merits inquiry requires a more developed record
Whether USAELC plausibly pleaded due process (bias) and breach-of-contract claims	USAELC: alleged substantial compliance, bias by ACCET staff, and that the denial was unsupported by the record	ACCET: the denial letter documents noncompliance with multiple standards and shows the decision was not arbitrary	Held: Dismissal was premature; the complaint was not properly resolved against USAELC at 12(b)(6) and claims must be assessed on remand (no merits decision)

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (sets plausibility standard for Rule 12(b)(6))
Sheppard v. Visitors of Va. State Univ., 993 F.3d 230 (standard of review for Rule 12(b)(6))
Hall v. DIRECTV, LLC, 846 F.3d 757 (plausibility vs. probability explanation)
Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159 (treating attached exhibits as adopted by plaintiff; consider why document is attached)
E.I. du Pont de Nemours v. Kolin Indus., Inc., 637 F.3d 435 (evaluate complaint and incorporated documents together)
Pro. Massage Training Ctr., Inc. v. Accreditation All. of Career Schs. And Colls., 781 F.3d 161 (substantial-evidence/arbitrary-and-capricious standard for due process claims against accrediting agencies)
Int’l Refugee Assistance Project v. Trump, 961 F.3d 635 (pleading-stage plausibility must account for substantive standards)
Graves v. Lioi, 930 F.3d 307 (distinguishing pleading sufficiency from evidence-based inquiries)