Ashford University, LLC, a for-profit educational institution, filed a petition for review of a Department of Veterans Affairs’ (VA) suspension of payments for educational assistance. The VA also suspended approval of new enrollments and re-enrollments for its online programs, unless the University obtained approval for its courses from the correct state approving agency (SAA).
Ashford provides online courses to veterans and other students. In November 2017, the VA sent Ashford a Cure Letter, informing it that its online courses were not approved by the correct SAA. The VA indicated it was going to suspend the payment of educational assistance and suspend approval of new enrollments and re-enrollments of Ashford’s online programs unless it took corrective action within in 60 days.
The petition that Ashford filed in the U.S. Court of Appeals asserted that the Cure Letter announced new rules, and argued that 38 U.S.C. § 502 provides the court with jurisdiction to review them. Ashford argued that the new rules were invalid. It asked the Court to find that the “new rules” were unlawful.
In 2013, Ashford moved its headquarters from Iowa to San Diego, California, and listed its corporate address in San Diego. Ashford closed its campus in Iowa and opted to offer all of its classes online.
The U.S. Court of Appeals said that there was no information in the record to suggest that Ashford’s Arizona location employed teaching staff, or had facilities for making online courses available. Ashford operated an Administrative Online Student Services Center in Phoenix, AZ, where financial services managers and other financial employees worked.
However, in 2016, the Iowa SAA stated that it would no longer grant Ashford approval because it closed its Iowa campus and only provided online courses. Ashford later received SAA approval from Arizona in July 2017.
In November 2017, Ashford received a Cure Letter from the Director of the VA’s Muskogee Regional Office stating that the University was not in compliance with 38 U.S.C. § 3672(a)(1). The VA said that it found non-compliance because Ashford did not secure approval of the SAA where it “is located.”
The Cure Letter said that educational institutions are required to obtain approval from the SAA where their “main campus” is located. The Cure Letter said that Ashford’s main campus would be in San Diego and that it must therefore secure approval from California SAA.
Veteran Tuition Assistance
The VA makes tuition payments directly to educational institutions for veterans who are enrolled in “approved” courses of education as a part of the GI Bill. For veterans to be eligible to receive the GI Bill’s payment assistance, the courses in which they enroll must be approved by “the State approving agency for the State where such educational institution is located.”
According to 38 U.S.C. § 502, only the SAA for the State where the educational institution’s main campus is located may approve courses for VA training. The term “main campus” is defined in 38 C.F.R. § 21.4266 as a “location where the primary teaching facilities of an educational institution are located.”
Ashford argued that the Court of Appeals has jurisdiction to review two erroneous “legal interpretations” in the Cure Letter. Ashford asserted that the “VA’s first new interpretation contends that the VA has authority to review and to nullify approval determinations made by [SAA’s].” It argued that the new interpretation conflicts with 38 U.S.C. § 3682, which prevents the VA from exercising “supervision or control” over an SAA. Ashford also argued that the VA’s new interpretation changed the definition of “the main campus.”
According to Ashford, the new interpretations were rule-making that required but failed to provide the public with notice of the proposed new rules and an opportunity to submit comments about the proposed rules prior to their entry into force.
U.S. Court of Appeals Jurisdiction
Ashford argued the U.S. Court of Appeals had jurisdiction over its petition under 38 U.S.C. § 502. Section 502 says that only final agency actions rendered by the Secretary of the VA are subject to review. “Such review shall be in accordance with chapter 7 of title 5 and maybe sought only in the United States Court of Appeals for the Federal Circuit.” Title 5 section 552 refers to ‘substantive rules of general applicability adopted as authorized by law,’ while section 553 requires the Department to follow notice-and-comment procedures prior to ‘rule making.’”
In N.L.R.B. v. Bell Aerospace Co. Div. of Textron, 416 U.S. 267, 292, 94 S. Ct. 1757, 1771, 40 L. Ed. 2d 134 (1974) the U.S. Supreme court described the term “rules” as “generalized standard[s]” and “adjudications” as “individual” and “case-by-case’ determinations.” The Court said that the Cure Letter was not rule making, but was part of an adjudication. The Court based this holding on the fact that the Cure Letter was specific to Ashford, that the letter described only Ashford’s specific situation, and that it included facts specifically related to Ashford’s CEO and the University’s teaching facilities.
The U.S. Court of Appeals also held that Ashford’s petition would be proper only if it challenged a final agency action. Ashford stated the Cure Letter should be treated as such because it required immediate compliance “on pain of sanction.” However, the U.S. Court of Appeals said that section 502 is “silent on finality,” but it states that the Federal Circuit review “shall be in accordance with chapter 7 of title 5.” By looking further at its legislative history, the Court of Appeals determined
Ashford asserted that were the Cure Letter part of an adjudication, it would still be reviewable because it “produces an agency statement that ‘fits within the APA’s definition of “rule.’” Ashford stated that the Cure Letter “announced” two “new legal interpretations.”
The Court of Appeals held that the new interpretations were not rules that would be sufficient to invoke section 502 jurisdiction. The Court cited, N.L.R.B. v. Bell Aerospace Co. Div. of Textron, 416 U.S. 267, 293, 94 S. Ct. 1757, 1771, 40 L. Ed. 2d 134 (1974), for the proposition that an agency “is not precluded from announcing new principles in an adjudicative proceeding,” and that the difference between rulemaking and adjudication lies within the agency’s discretion. The U.S. Court of Appeals concluded that section 502 did not provide it with jurisdiction because the Cure Letter did not announce a rule or policy statement.
The United States Court of Appeals found the case was not justiciable and dismissed the veteran’s petition. If Ashford had retained an attorney who was experienced in Veterans Affairs, this case would not have been filed until the Veteran received a final agency decision. Even if the veteran had received a final agency decision from the VA, the Veteran might not have filed the lawsuit upon the advice of counsel. For more information on Veterans Affairs matters, we recommend that you speak with an experienced veterans’ attorney at Whitcomb Selinsky PC. Our first consultation is always free, and you can reach us at 866-476-4558.