ASHFORD UNIVERSITY, LLC, Petitioner v. SECRETARY OF VETERANS AFFAIRS, Respondent
2018-1213
United States Court of Appeals for the Federal Circuit
Decided: March 3, 2020
Petition for review pursuant to 38 U.S.C. Section 502.
KWAKU AKOWUAH, Sidley Austin LLP, Washington, DC, argued for petitioner. Also represented by CARTER GLASGOW PHILLIPS, DANIEL HAY, TOBIAS SAMUEL LOSS-EATON; GERARD D. KELLY, Chicago, IL.
WILLIAM JAMES GRIMALDI, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for respondent. Also represented by JOSEPH H. HUNT, MARTIN F. HOCKEY, JR., ROBERT EDWARD KIRSCHMAN, JR.; Y. KEN LEE, BRYAN THOMPSON, Office of General Counsel, United States Department of Veterans Affairs, Washington, DC.
Before NEWMAN, DYK, and CHEN, Circuit Judges.
The Department of Veterans Affairs (VA) provides educational assistance in the form of monetary benefits to veterans enrolled in approved course[s] of education. See
Petitioner Ashford University, LLC (Ashford) is a for-profit educational institution that provides online courses to veterans and other students. In November 2017, the VA sent a letter (Cure Letter) to Ashford stating that Ashford‘s online courses were not approved by the correct SAA. See
Ashford petitions this court for review, contending that the Cure Letter announces new rules and that
We conclude that the Cure Letter is not rulemaking or any other action reviewable under section 502. The Cure Letter is also not subject to judicial review because it is not a final agency action under the Administrative Procedure Act (APA). We accordingly dismiss the petition.
BACKGROUND
I
A
As part of the modern GI Bill, the VA provides educational assistance in the form monetary benefits to veterans enrolled in approved course[s] of education. See
For veterans to be eligible to receive payment assistance for a course of study, the course must be approved by the State approving agency for the State where such educational institution is located.
(a) Definitions. The following definitions apply to the terms used in this section.
. . .
(3) Main campus means the location where the primary teaching facilities of an educational institution are located. If an educational institution has only one teaching location, that location is its main campus. If it is unclear which of the educational institution‘s teaching facilities is primary, the main campus is the location of the primary office of its Chief Executive Officer.
B
If an educational institution has not secured the required approval, the VA has statutory authority to suspend educational assistance to veterans after following specified procedures.
The [VA] may suspend educational assistance to eligible veterans . . . in any course as to which the [VA] has evidence showing a substantial pattern of eligible veterans . . . who are receiving such assistance by virtue of their enrollment in such course but who are not entitled to such assistance because (i) the course approval requirements of this chapter are not being met . . . .
(i) the [VA] provides to the [SAA] concerned and the educational institution concerned written notice of any such
failure to meet such approval requirements . . .; [and] (ii) such institution refuses to take corrective action or does not within 60 days after such notice (or within such longer period as the Secretary determines is reasonable and appropriate) take corrective action . . . .
II
Ashford is a for-profit educational institution that offers only online courses. Ashford was formerly known as The Franciscan University (Franciscan). Franciscan taught classes at its headquarters in Clinton, Iowa. In 2005, Franciscan was acquired by its current owner, Bridgepoint Education, Inc., and renamed Ashford University.
In 2013, Ashford moved its headquarters from Iowa to San Diego, California. Ashford lists its San Diego address as its Corporate address, and Ashford‘s CEO‘s office appears to be at that address. In 2015, Ashford announced that it would be closing its Clinton, Iowa campus and instead offering all of its classes online.
Ashford maintains an Administrative Online Student Services Center in Phoenix, Arizona, where a Financial Services Director, several financial services managers, and other financial employees work. There is nothing in the record to suggest that the Arizona location employs Ashford professors or other teaching staff, or includes facilities for making online courses available.
From 2005 to 2016, Ashford‘s online courses had been approved by the Iowa SAA. However, in 2016, the Iowa SAA indicated that it would no longer grant Ashford approval because Ashford had closed its Iowa campus and moved to solely online courses. Ashford challenged the Iowa SAA‘s determination, and the lawsuit appears to be pending.3 At the urging of the VA, in June 2016, Ashford sought approval from the SAA in California, where Ashford‘s headquarters are located. However, after the California SAA requested additional information from Ashford, Ashford withdrew its application from the California SAA and then applied to the Arizona SAA for approval, which Arizona granted effective July 10, 2017.
On November 9, 2017, the Director of the VA‘s Muskogee Regional Office, C. Jason McClellan, sent a letter (Cure Letter) to Ashford regarding the requirement that Ashford have SAA approval. The Cure Letter asserted that Ashford was not in compliance with
Shortly thereafter, on November 17, 2017, Ashford petitioned this court for review of the Cure Letter. Ashford contends that this court has jurisdiction under
To Ashford, the second new interpretation effectively revises the text of [the] VA‘s existing regulations pertaining to the definition of main campus. Appellant‘s Br. 2–3. In particular, Ashford argues that the VA‘s interpretation improperly imported the meaning of main campus from
DISCUSSION
I
A
Ashford has the burden of establishing this court‘s jurisdiction over its petition. See Disabled Am. Veterans v. Sec‘y of Veterans Affairs, 859 F.3d 1072, 1077 (Fed. Cir. 2017). Ashford contends that we have jurisdiction under
An action of the Secretary [of the VA] to which section 552(a)(1) or 553 of title 5 (or both) refers is subject to judicial review. Such review shall be in accordance with chapter 7 of title 5 and may be sought only in the United States Court of Appeals for the Federal Circuit.
Title 5, section 552(a)(1) refers in relevant part to substantive rules of general applicability
The Administrative Procedure Act (APA) draws a distinction between rules and adjudications. A rule is defined in relevant part as the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.
Adjudications are not subject to section 502 review. Whereas section 502 provides this court with jurisdiction to review VA actions to which section 552(a)(1) . . . refers, a different subsection—552(a)(2)—refers to orders[] made in the adjudication of cases,
The Cure Letter is part of an adjudication. The Letter is individualized: it addresses Ashford‘s specific situation at length, including various evidentiary facts relating to the location of Ashford‘s CEO and Ashford‘s teaching facilities. And the Letter‘s core assertion—that Ashford does not have the required SAA approval—does not apply to any entity other than Ashford. The situation here is thus different from cases like Appalachian Power Co. v. EPA, 208 F.3d 1015, 1017–18 (D.C. Cir. 2000), and Coal. for Common Sense, 464 F.3d at 1317, in which the agency promulgated a generalized guidance document or letter not specific to any entity. Instead, the Cure Letter applies existing regulations (namely,
Ashford contends that even if the Cure Letter were part of an adjudication, it is
The views expressed in [SEC v. Chenery Corp., 332 U.S. 194 (1947)] and [NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969)] make plain that [an agency] is not precluded from announcing new principles in an adjudicative proceeding and that the choice between rulemaking and adjudication lies in the first instance within the [agency‘s] discretion.
Ashford‘s challenge to the Cure Letter‘s announc[ing] of new interpretation[s] is, in essence, a challenge to the announcing [of] new principles that Bell Aerospace permits an agency to do in an adjudication. See id.
To be sure, courts have identified exceptions to the general principle that an adjudication does not announce rules or statements of general policy. But none of these exceptions applies here. For example, in Wyman-Gordon, 394 U.S. at 764, the Court found that a rule was announced in an adjudication because it was entirely forward-looking—i.e., not binding on the parties to the adjudication but instead only binding on non-parties. The Cure Letter, by contrast, solely addresses the party to this adjudication: Ashford.
Our decision in Snyder v. Sec‘y of Veterans Affairs, 858 F.3d 1410 (Fed. Cir. 2017) is also inapposite. There, a deceased veteran‘s widow seeking accrued benefits challenged an award of fees to the veteran‘s former attorney. Id. at 1411–12. The Regional Officer (RO) held that the death of the veteran precluded the widow‘s challenge, and the widow appealed this determination to the Board of Veterans’ Appeals. Id. The Board requested an opinion from the VA‘s General Counsel. Id. at 1412. The General Counsel issued a precedential opinion, published in the Federal Register, stating in relevant part that: A claim, pending at the time of a veteran‘s death, challenging an attorney‘s entitlement to payment of attorney fees . . . may provide a basis for an accrued benefits claim. Id. The attorney challenged this opinion in this court. Id.
We held that section 502 provided us with jurisdiction over the attorney‘s challenge because the General Counsel‘s opinion was a rule; it was framed entirely in general terms (not specific to the adjudication from which it arose) and promulgated in a form (a precedential VA General Counsel opinion) that VA regulations expressly make subject to the provisions of § 552(a)(1). Id. at 1413; see
Because the Cure Letter does not announce a rule or policy statement, section 502 does not provide this court with jurisdiction over Ashford‘s petition.
B
Ashford contends that aside from a section 502 petition, which we have now foreclosed, it has no path to judicial review of a VA decision to suspend or discontinue educational assistance payments because Section 511(a) precludes judicial review. Thus, to Ashford, a lack of 502 jurisdiction here would improperly insulate agency lawmaking from review. Reply Br. 18.
There is a strong presumption that Congress intends judicial review of administrative action. Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670 (1986). If review were unavailable outside section 502, the presumption of reviewability might justify a different reading of section 502. As the Supreme Court noted in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016), the presumption applies when [courts] interpret statutes, including statutes that may limit or preclude review. Id. at 2140. But, contrary to Ashford‘s argument, judicial review of the VA‘s adjudicatory decision is available.
Title 38, section 511(a) limits judicial review of a decision by the Secretary under a law that affects the provision of benefits. It provides in relevant part that:
The Secretary shall decide all questions of law and fact necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans or the dependents or survivors of veterans. Subject to subsection (b), the decision of the Secretary as to any such question shall be final and conclusive and may not be reviewed by any other official or by any court, whether by an action in the nature of mandamus or otherwise.
(b) The second sentence of subsection (a) does not apply to—
(1) matters subject to section 502 of this title;
. . .
(4) matters covered by chapter 72 of this title[, which provides for review in this court of decisions by the Court of Appeals for Veterans Claims (Veterans Court)].
Section 511 thus provides only two potential paths for judicial review of a discontinuance decision by the Secretary: (1) directly in this court for matters subject to section 502 (which, as we have concluded, Ashford‘s challenge is not),
The second path of review involves both the Board of Veterans’ Appeals (Board) and the Veterans Court. Section 511(a)‘s general preclusion language—that the decision of the Secretary [of the VA] . . . may not be reviewed . . . by any court—merely
We conclude that the system of Board review is applicable to the VA‘s actions in question. The Veterans Court has exclusive jurisdiction to review decisions of the Board of Veterans’ Appeals.
All questions of law and fact necessary to a decision by the Secretary of Veterans Affairs under a law that affects the provision of benefits by the Secretary to veterans or their dependents or survivors are subject to review on appeal to the Secretary. Decisions in such appeals are made by the Board of Veterans’ Appeals. Examples of the issues over which the Board has jurisdiction include, but are not limited to, the following:
. . .
(8) Veterans’ Educational Assistance (
38 U.S.C. chapter 34 ).
(emphasis added). The benefits provided here are Veterans’ Educational Assistance under chapter 34. Accordingly, Ashford may appeal a decision of the Secretary on suspension or discontinuance of benefits to the Board, the Board‘s decision to the Veterans Court, and the Veterans Court‘s decision to this court.
Ashford appears to agree that a veteran denied educational assistance could seek review through the Board process. But Ashford contends that the Board would lack jurisdiction over any appeal from Ashford, stating that it is unaware . . . of any instance in which the Board has entertained an appeal brought by anyone other than a beneficiary [i.e., a veteran] or representative of a beneficiary. Ashford Supp. Br. 4 n.1. However, our decision in Bates is to the contrary.
In Bates, we held that an attorney‘s challenge to the VA‘s cancellation of his accreditation was a decision . . . under a law that affects the provision of benefits . . . to veterans or the dependents or survivors of veterans and so must be heard by the Board. 398 F.3d at 1359, 1362 (quoting
Here, the discontinuance of funding to Ashford is under a statutory section and
Ashford nonetheless contends that the Board would lack jurisdiction over an appeal by Ashford because Ashford is not a natural person. Ashford notes
Here, construing claimant to only include individual[s] that are natural person[s] would prevent any entity other than an individual veteran from challenging any decision of the Secretary denying benefits. See
This result is also supported by the design of the statutory scheme. Congress clearly provided that veterans denied educational benefits could and should resort to the Board appeals process.
II
Even if we otherwise had section 502 jurisdiction, we conclude that Ashford‘s petition would be proper only if it challenged a final agency action. Ashford argues that the Cure Letter should be treated as final because it commands immediate compliance from Ashford on pain of sanction. Ashford Supp. Br. 8. But we disagree. The Cure Letter was not a final agency action.
A
We first consider whether section 502 includes a finality requirement. Section 502 itself is silent on finality, but section 502 states that Federal Circuit review shall be in accordance with chapter 7 of title 5. That chapter, in turn, provides that [a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.
On its face, section 704 does not provide that agency action made reviewable by statute must be final. But even before the enactment of the APA in 1946, the Supreme Court recognized that a finality requirement is inherent in agency judicial review provisions generally. For example, in Federal Power Commission v. Metropolitan Edison Co., 304 U.S. 375 (1938), the Court construed a review statute to require final agency action, though the statutory text was silent, because a contrary construction, affording opportunity for constant delays in the course of the administrative proceeding for the purpose of reviewing mere procedural requirements or interlocutory directions, would do violence to the manifest purpose of the [review] provision. Id. at 383–84. More recently, in Lujan v. National Wildlife Federation, 497 U.S. 871 (1990), the Court recognized that [e]xcept where Congress explicitly provides for our correction of the administrative process at a higher level of generality, [courts] intervene in the administration of the laws only when, and to the extent that, a specific ‘final agency action’ has an actual or immediately threatened effect. Id. at 894 (emphasis added) (citing Toilet Goods Ass‘n v. Gardner, 387 U.S. 158, 164–66 (1967)).
The legislative history of section 704 supports reading the APA itself as requiring finality. This history reveals that Congress intended to codify existing law on judicial review of agency actions, which included a court-imposed finality requirement as a prerequisite for judicial review. Carter/Mondale Presidential Comm., Inc. v. Fed. Election Comm‘n, 711 F.2d 279, 285 n.9 (D.C. Cir. 1983). [T]he Senate Judiciary Committee explained that one purpose of § 704 was ‘to negative any intention to make reviewable merely preliminary or procedural orders where there is a subsequent and adequate remedy at law available, as is presently the rule.’ Id. (quoting Senate Judiciary Comm., Committee Print on the Administrative Procedure Act 27 (1945), Administrative Procedure Act: Legislative History 37 (1946) (citations omitted)); see also Attorney General‘s Manual on the Administrative Procedure Act 101, 102 (1947) ([M]any regulatory statutes, either expressly or as they
B
Ashford contends that even if there were a finality requirement, it is not jurisdictional, and that the government waived the defense by failing to raise it in its briefing. Ashford notes that the government included a footnote in its brief asserting that no final agency action has occurred in this matter rendering any section 511(a) challenge unripe, Appellee‘s Br. 35 n.2, but contends that this assertion is not sufficient to preserve the section 502 finality issue.
We need not decide in this case whether finality under section 704 is jurisdictional or whether the argument was sufficiently presented in the government‘s briefing. Even if the finality requirement were non-jurisdictional, the requirement may be—and, here, should be—enforced. In general, [t]he matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases. Singleton v. Wulff, 428 U.S. 106, 121 (1976); see also Interactive Gift Exp., Inc. v. Compuserve Inc., 256 F.3d 1323, 1345 (Fed. Cir. 2001). And there are compelling reasons for Circuit courts to enforce the finality requirement in agency cases regardless of waiver. For example, in Automated Merchandizing Systems, Inc. v. Lee, 782 F.3d 1376 (Fed. Cir. 2015), we considered whether the challenged agency action was final—even though the finality issue was not raised in the district court—where the lack of finality was clear[], and the finality issue was immediately reviewable and present[ed] a significant question of continuing public concern. Id. at 1379–81.
We find the circumstances of this case justify enforcement of the requirement of finality. There are no disputed factual issues, so the finality issue may be resolved purely as a question of law. As we discuss below, that the Cure Letter is not a final agency action is beyond any doubt. Ashford petitions directly to this court, so the finality issue could not have been raised at any lower tribunal. Ashford had an opportunity to address and did address the issue at oral argument and in supplemental briefing. And, most importantly, the courts have a strong institutional interest in enforcing the finality requirement in the agency context.
The finality requirement serves the important purpose of promoting efficient judicial administration, Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981), and serves to avoid ‘unnecessary piecemeal appellate review without precluding later appellate review of the legal issue or any other determination made on a complete administrative record,’ Williams v. Principi, 275 F.3d 1361, 1364 (Fed. Cir. 2002) (quoting Cabot Corp. v. United States, 788 F.2d 1539, 1543 (Fed. Cir. 1986)). Premature review of agency actions, by contrast, afford[s] opportunity for constant delays in the course of the administrative proceeding for the purpose of reviewing mere procedural requirements or interlocutory directions, [and] would do violence to the manifest purpose of the [review] provision. Fed. Power, 304 U.S. at 383–84; see also Abbott Labs. v. Gardner, 387 U.S. 136, 148–49 (1967), overruled on other grounds by Califano, 430 U.S. 99 (1977). In light of these circumstances, we will consider the finality issue notwithstanding any failure of the government to raise it.
C
For agency action to be final, two conditions must be met: (1) the action must mark the ‘consummation’ of the agency‘s decisionmaking process; and (2) the action must be one by which ‘rights or obligations have been determined,’ or from which ‘legal consequences will flow.’ Bennett v. Spear, 520 U.S. 154, 177–78 (1997) (first quoting Chi. & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 113 (1948); and then quoting Port of Bos. Marine Terminal Ass‘n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71 (1970)).
The Cure Letter is neither the consummation of the VA‘s decisionmaking process nor the determin[ation] of rights or obligations. We first address the consummation requirement. The Secretary of the VA has delegated to each Director of a VA Regional Processing Office (Regional Director) the authority to discontinue payment of educational benefits to educational institutions like Ashford. See
The Regional Director must refer the matter to the Committee on Educational Allowances (Committee) to make a recommendation as to whether educational assistance . . . should be discontinued.
Ashford contends that the Regional Director‘s threat of suspension is immediately reviewable because it is enforced by the threat of suspension. The Regional Director on his own can suspend benefits after the required notice, but he has not acted here to suspend benefits and there is no final decision as to suspension. We need not now decide whether a decision to suspend could ever be reviewable as a final agency action separate from a discontinuance decision. See In re Sac & Fox Tribe of Miss. in Iowa/Meskwaki Casino Litig., 340 F.3d 749, 756 (8th Cir. 2003) (holding that a temporary closure order closing an Indian tribe‘s casino was not a final agency action—even though it may have an immediate effect on the [t]ribe‘s finances in the near term—because the closure order was on a temporary basis pending further administrative review). As an intermediate agency action, a suspension of benefits may be only subject to review on the review of the final agency action: the discontinuance of educational benefits. See
Ashford also has not satisfied the second requirement: demonstrating that the challenged action—here, the threat of suspension—is one by which rights or obligations have been determined, or from which legal consequences will flow. Bennett, 520 U.S. at 178 (internal quotation marks omitted). To be sure, the Regional Director in the Cure Letter has the authority to suspend benefits pending a final decision, See
In sum, the Cure Letter is merely tentative and interlocutory [in] nature. See Bennett, 520 U.S. at 178. At this stage, there has been no final agency action.
CONCLUSION
We conclude that this case is not justiciable for two reasons. First, the Cure Letter is not an agency action reviewable under section 502. Second, the Cure Letter is not subject to review because it is not a final agency action. Accordingly, Ashford‘s petition is
DISMISSED
COSTS
No costs.