Grand Canyon University v. Miguel A. Cardona

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GRAND CANYON UNIVERSITY,
Plaintiff-Appellant,
v.
MIGUEL A. CARDONA, in his official
capacity as Secretary of the United States
Department of Education; U.S.
DEPARTMENT OF EDUCATION,
Defendants-Appellees.
No. 21-17113
D.C. No. 2:21-cv-00566-DLR
MEMORANDUM*
Appeal from the United States District Court
for the District of Arizona
Douglas L. Rayes, District Judge, Presiding
Submitted December 5, 2022**
Phoenix, Arizona
Before: WARDLAW and BUMATAY, Circuit Judges, and SCHREIER,***
District Judge.
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
*** The Honorable Karen E. Schreier, United States District Judge for the
District of South Dakota, sitting by designation.
FILED
DEC 28 2022
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Grand Canyon University (GCU) appeals the dismissal of its complaint
against the Department of Education (the “Department”), which sought to obtain
COVID-19 emergency relief funds established for nonprofit institutions of higher
education (IHEs). We review de novo the grant of a motion to dismiss. See Faulkner
v. ADT Sec. Servs., Inc., 706 F.3d 1017, 1019 (9th Cir. 2013). Dismissal is proper
“if the complaint fails to plead enough facts to state a claim to relief that is plausible
on its face.” Koessler v. CVS Health Corp., 977 F.3d 803, 807 (9th Cir. 2020)
(simplified). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
GCU is a private, Christian university located in Phoenix. In 2004, after 55
years as a nonprofit institution, GCU’s Board of Trustees approved its sale to a for-
profit corporation to raise money to keep the University operating. The Department
now classifies GCU as a for-profit “proprietary institution of higher education”
under § 102(b) of the Higher Education Act (HEA), see 20 U.S.C. § 1002(b), as
opposed to a § 101 “nonprofit” IHE, see 20 U.S.C. § 1001(a)(4). Through the
Higher Education Emergency Relief Funds (HEERF) II and III, Congress allocated
the vast majority of relief funds for “institutions of higher education as defined in
[HEA] section 101” and a smaller amount to “institutions of higher education as
defined in section 102(b) of the HEA.” See Coronavirus Response and Relief
Appropriations Act (CRRSAA), Pub. L. No. 116-260, § 314(a)(1), (a)(4), 134 Stat.
1909, 1932–33 (2020); accord American Rescue Plan Act (ARPA), Pub. L. No.

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117-2, § 2003(1), (4), 135 Stat. 4, 23–24 (2021).1
GCU argues that it qualifies for § 101 nonprofit relief funds under HEERF II
and III. The university relies heavily on the fact that, in 2018, it was purchased by
a company that the Internal Revenue Service (IRS) recognized as a 501(c)(3)
nonprofit. But HEA § 101 nonprofit status requires more than the IRS’s recognition
of 501(c)(3) status under 26 U.S.C. § 501(c)(3). See 34 C.F.R. § 600.2 (defining a
HEA § 101 nonprofit); see also HEA § 103(13), 20 U.S.C. § 1003(13) (same). In
2019, and again in 2021, the Department determined that GCU failed to satisfy the
definition of a “nonprofit” IHE under the HEA. That determination is not challenged
in this action.2 Because GCU is not a recognized HEA § 101 nonprofit, it is not
entitled to funds reserved for such IHEs under HEERF II and III.
Despite the Department’s rejection of GCU's § 101 nonprofit status, GCU
contends that it is still entitled to nonprofit HEERF relief funds under Department
regulations. GCU specifically relies on a Department regulation that allows an
applicant to prove it is a “nonprofit organization” for “some programs” based on
501(c)(3) status. See 34 C.F.R. § 75.51(b)(1). But these regulations apply only “to
1 Congress also allocated funds to IHEs under HEA § 102(c)—a classification not
relevant here. CRRSAA § 314(a)(1); ARPA § 2003.
2 GCU challenged that determination in a separate lawsuit against the Department
and lost. See Grand Canyon Univ. v. Rosenfelt, No. 2:21-cv-177 (D. Ariz.). The
district court granted the Department’s Cross-Motion for Summary Judgment on
December 1, 2022.

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the extent [they are] consistent with the authorizing statute.” Id. § 75.1(b). Here,
the authorizing statutes expressly allocate the nonprofit funds to “institution[s] of
higher education as defined in [HEA] section 101.” See CRRSAA § 314(a)(1);
accord ARPA § 2003. Consequently, we agree with the district court that
Department regulations, which do not purport to determine a school’s HEA status,
are inapplicable here.
AFFIRMED.

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