Court Opinion

ID: 3035210
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:52:16.102622+00
Date Added: 2024-06-11T07:37:50.867121
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             MAR 22 2010

                                                                        MOLLY C. DWYER, CLERK
                     UNITED STATES COURT OF APPEALS                      U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

NATIONAL CAREER COLLEGE, INC.,                   No. 08-17780
d.b.a. Hawaii Business College; et al.,
                                                 D.C. No. 1:07-cv-00075-HG-LEK
              Plaintiffs - Appellants,

  v.                                             MEMORANDUM *

MARGARET SPELLINGS, Secretary,
United States Department of Education, in
her official capacity,

              Defendant - Appellee.

                    Appeal from the United States District Court
                             for the District of Hawaii
                   Helen Gillmor, Senior District Judge, Presiding

                      Argued and Submitted February 20, 2010
                                Honolulu, Hawaii

Before: FARRIS, D.W. NELSON and BEA, Circuit Judges.

       Plaintiffs-Appellants appeal the district court’s order granting summary

judgment to the Secretary of the U.S. Department of Education (“DOE”) and

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
denying Plaintiffs’ cross-motion for summary judgment. We have jurisdiction

under 28 U.S.C. § 1291, and we affirm.1

      Allen Mirzaei (“Mirzaei”) and his two sons own 100% of National Career

College, Inc., doing business as Hawaii Business College (“HBC”). HBC had been

approved by the DOE to participate in Title IV federal financial aid programs

before Mirzaei purchased it. When Mirzaei purchased 100% of HBC in 2006, it

triggered a “change in control” of HBC, and thus HBC was required to reapply

with the DOE to have HBC deemed eligible to participate in Title IV federal

financial aid programs. The DOE denied HBC’s request for reapplication, citing

Mirzaei’s previous breach of his fiduciary duty when he owned another college.

      We review the district court’s legal determinations de novo, and we review

the agency’s action to determine if it was “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706(2)(A);

Center for Biological Diversity v. Nat’l Highway Traffic Safety Admin., 538 F.3d
1172, 1193 (9th Cir. 2008). Our review is limited to “whether the [agency’s]

decision was based on a consideration of the relevant factors and whether there has

been a clear error of judgment.” Citizens to Preserve Overton Park, Inc. v. Volpe,

      1
        Because the parties are familiar with the facts, we recite them only as
necessary to the disposition of the case.

                                          2
401 U.S. 402, 416 (1971), abrogated on other grounds by Califano v. Sanders, 430
U.S. 99 (1977). We are not empowered to substitute our judgment for that of the

agency. Id.

      HBC contends that when its application to participate in Title IV funds was

rejected, it was subject to a de facto debarment, without receiving due process.

The denial of HBC’s application for recertification was not a de facto debarment.

When a party is debarred, that party cannot seek to enter into any contract with any

federal agency. 34 C.F.R. §§ 85.125, 85.200, 85.930. Here, HBC has not been

barred from entering into other contracts with the DOE or with the other agencies

within the federal government. This single incident is insufficient to prove a de

facto debarment. See Redondo-Borges v. U.S. Dept. of Housing and Urban Devel.,

421 F.3d 1, 8–9 (1st Cir. 2005); TLT Constr. Corp. v. United States, 50 Fed. Cl.
212, 215–16 (Fed. Cl. Ct. 2001).

      The DOE stated that it based its decision on the applicable factors of

financial responsibility, 34 C.F.R. § 668.15 and Part 668, Subpart L, and standards

of administrative capability, 34 C.F.R. § 668.16. As part of the decision-making

process, the DOE considered the forged financial statements that were previously

submitted to the DOE on behalf of Computer Business College when Mirzaei was

its President and sole owner.

                                          3
         When deciding whether to grant an application to participate in Title IV

programs, the DOE is charged with making sure the college and the people

managing that college will fulfill their fiduciary duties in handling many thousands

of dollars of the public’s money. 34 C.F.R. §§ 668.15, 668.16, 668.82. The DOE

did not err in considering all relevant circumstances, including Mirzaei’s previous

breach of fiduciary duty. Mirzaei’s argument that his previous settlement

agreement with the DOE somehow precluded the DOE from considering Mirzaei’s

conduct in the future is specifically refuted by the language of that agreement.

         Further, if this were a debarment based solely on Mirzaei’s character, then

the DOE would not consider certifying any institution of which he owned a

portion. Yet, the DOE did not raise any objections when Mirzaei owned 49% of

HBC, and specifically stated it would be inclined to grant an application for

recertification if Mirzaei owned 25% or less in the future. Finally, the DOE gave

Plaintiffs an opportunity to contest the factual basis of the DOE’s rejection,

pursuant to 34 C.F.R. § 600.41(c)(1). HBC failed to present any additional

evidence refuting Mirzaei’s involvement with the forged accounting statements,

nor any safeguards put in place to keep him from perpetrating the same fraud

again.

         AFFIRMED.

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