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Itt Educational Services, Inc. v. The California State Approving Agency for Veterans Education

United States District Court, C.D. California, Southern Division

June 17, 2015

ITT EDUCATIONAL SERVICES, INC., Plaintiff,
v.
THE CALIFORNIA STATE APPROVING AGENCY FOR VETERANS EDUCATION; THE CALIFORNIA DEPARTMENT OF VETERAN AFFAIRS, Defendants.

ORDER GRANTING EX PARTE APPLICATION FOR ORDER REMANDING THIS ACTION FOR LACK OF SUBJECT MATTER JURISDICTION OR, ALTERNATIVELY, FOR TEMPORARY RESTRAINING ORDER AND IMMEDIATE STAY OF CSAAVE'S SUSPENSION NOTICE [5]

DAVID O. CARTER, District Judge.

Before the Court is Plaintiff's Ex Parte Application for Order Remanding this Action for Lack of Subject Matter Jurisdiction or, Alternatively, for Temporary Restraining Order and Immediate Stay of CSAAVE's Suspension Notice ("Ex Parte App.") (Dkt. 5). The Court finds this matter appropriate for resolution without oral argument. See Fed.R.Civ.P. 78; L.R. 7-15. For the reasons stated below, the Court GRANTS the Ex Parte Application, VACATES the hearing on this matter scheduled for Friday, June 19, 2015, and REMANDS this action to the state court.

I. Background

This case arises from allegations by Plaintiff ITT Educational Services, Inc. ("ITT"), a private, for-profit postsecondary educational institution, that Defendants California State Approving Agency for Veterans Education ("CSAAVE") and California Department of Veteran Affairs ("CalVet") have unlawfully suspended their approval of ITT courses such that military veterans and their dependents can no longer use their G.I. Bill benefits to attend school at ITT.

A. Statutory and Regulatory Framework

Title 38 of the United States Code governs veterans' benefits, which include rehabilitation, job training, and educational assistance services. In 2008, Congress enacted the Post-9/11 Veterans Educational Assistance Act ("Post-9/11 G.I. Bill" or "G.I. Bill"), codified at chapter 33 of Title 38. Pub. L. No. 110-252, 122 Stat. 2323 (2008). The Post-9/11 G.I. Bill provides up to 100% tuition payments for public schools, some funding for private schools, and additional payments for living and books. 38 U.S.C. § 3313.

The U.S. Department of Veterans Affairs ("VA") administers the G.I. Bill and oversees all decisions regarding individual veterans' and military dependents' eligibility to receive education benefits. See 38 U.S.C. § 3323. The VA, however, is not solely responsible for approving educational courses to which veterans can apply their G.I. Bill funds (often referred to as "Title 38 funds"). The G.I. Bill invites each state to establish a state approving agency ("SAA") to work closely with the VA to enforce federal regulations governing approval of courses. 38 U.S.C. § 3671(a) (requesting that the chief executive of each state create an SAA); id. § 3673 (recognizing importance of federal-state cooperation). The state may also impose its own regulations. Id. § 3672(a) (providing that SAA's approval of courses shall be in accordance with federal law "and such other regulations and policies as the State approving agency may adopt"). Generally, in order for veteran students to be able to use Title 38 funds to pay for a particular course of education, that course must be approved by the appropriate state's SAA, id. § 3676(a), unless the state does not have an SAA, in which case the VA will play the SAA's role for courses in that state, see id. § 3671(b)(1). But see 38 C.F.R. § 21.4152(b) (reserving VA's right to approve schools or courses notwithstanding lack of state approval).

An SAA "may" approve courses offered by proprietary for-profit education institutions such as ITT when such courses meet certain criteria. For instance, an SAA "may" approve courses that "have been accredited and approved by a nationally recognized accrediting agency or association." 38 U.S.C. § 3675(a)(1)(A); 28 C.F.R. § 21.4253(a)(1); see also 38 U.S.C. § 3675(a)(1)(B)-(D) (listing other courses that may be approved); 28 C.F.R. § 21.4253(a)(2)-(5) (same).

If a problem with approval arises after a course has already been approved, the SAA:

(1) May suspend the approval of a course for new enrollments... for a period not to exceed 60 days to allow the institution to correct any deficiencies, if the evidence of record establishes that the course... fails to meet any of the requirements for approval.
(2) Will immediately disapprove the course..., if any of the requirements for approval are not being met and the deficiency cannot be corrected within a period of 60 days.
(3) Upon suspension or disapproval, the State approving agency will notify the educational institution by certified or registered letter with a return receipt secured (38 U.S.C. 3679). It is incumbent upon the State approving agency to determine the conduct of courses and to take immediate appropriate action in each case in which it is found that the conduct of a course in any manner fails to comply with the requirements for approval.

38 C.F.R. § 21.4259(a).

Federal statute provides that no federal department, agency, or officer is permitted to "exercise any supervision or control, whatsoever, over any State approving agency, or State educational agency, or any educational institution." 38 U.S.C. § 3682; 38 C.F.R. § 21.4152(a). Exceptions include, inter alia : (1) statutorily-mandated annual evaluations of the SAAs by the VA; (2) the VA may enter into contracts with SAAs to carry out approval activities and reimburse them for reasonable expenses and thus may monitor whether the SAAs are complying with the relevant standards and provisions of the law; and (3) the VA retains the right to disapprove schools or ...


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