San Juan City College, Inc. v. United States

74 Fed. Cl. 448, 2006 U.S. Claims LEXIS 358, 2006 WL 3411860
CourtUnited States Court of Federal Claims
DecidedNovember 21, 2006
DocketNo. 01-73C
StatusPublished
Cited by2 cases

This text of 74 Fed. Cl. 448 (San Juan City College, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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San Juan City College, Inc. v. United States, 74 Fed. Cl. 448, 2006 U.S. Claims LEXIS 358, 2006 WL 3411860 (uscfc 2006).

Opinion

OPINION

HORN, Judge.

FINDINGS OF FACT

This case involves a contract dispute between San Juan City College (SJCC), its President Americo Reyes-Morales and the United States Department of Education (Department of Education). SJCC is a private, for-profit institution which, until it closed in 1996, offered vocational diploma programs primarily to low-income citizens of Puerto Rico. In 1984, SJCC began participating in a Program Participation Agreement (PPA) with the Department of Education, pursuant to “Subchapter IV-Student Assistance,” of the Higher Education Act of 1965, Pub.L. No. 89-329, 79 Stat. 1219 (1965) (codified as amended, 20 U.S.C. § 1070, et seq. (2000)). The PPA between the parties includes the following provision:

The Secretary may terminate this Agreement or the Institution’s participation in one or more of the programs covered by this Agreement under the Student Assistance General Provisions regulations, 34 CFR Part 668, Subpart G, “Fine, Limitation, Suspension, and Termination Proceedings.”

This PPA, which the parties have stipulated is a legally binding contract between the Department of Education and SJCC, was most recently renewed in May, 1993, and made available financial aid reimbursements to SJCC for students attending its schools. Specifically, SJCC participated in Federal Pell Grant Programs, which are used to credit students’ accounts to pay school tuition, fees and other charges. 20 U.S.C. § 1070(a). As late as the beginning of 1995, SJCC was on the reimbursement form of payment for Title IV funds.

On or about February 8, 1995, representatives of the Puerto Rico Departmento de [450]*450Hacienda, the Puerto Rican Treasury Department (Treasury Department), conducted an inventory on SJCC campuses as a result of an alleged tax debt owed by SJCC to the Treasury Department. The Treasury Department placed locks on the doors of both SJCC’s main campus and branch campus, all students were required to vacate the premises, and SJCC ceased holding classes for approximately two weeks.1

On February 14, 1995, Robert J. McKier-nan of the federal Department of Education’s Student Financial Assistance Programs sent Mr. Reyes-Morales, President of SJCC, a letter stating that the Department of Education had “been advised by the Consejo General de Educación de Puerto Rico that San Juan City College ceased operations at all its branches effective on February 6, 1995.”2 The letter further informed the school of its regulatory responsibilities concerning its Title IV participation “[i]f an institution closes.” The letter also instructed that SJCC was obligated to submit financial and performance reports within forty-five days, a letter of engagement from an independent auditor, as well as a five-year plan for record retention. The letter further stated that the school was obligated to return unexpended Title IV funds, less its administrative allowance, and instructed the school on how to provide committed funds to students who were enrolled when the institution “closed.” The letter requested that SJCC inform the Department of Education, in writing, “concerning what actions you have taken or will take in this matter.”

On March 3,1995, the Department of Education issued a memorandum placing SJCC on its closed school list and ceased treating SJCC as a participating school in its Title IV programs. For the next five months, the Department of Education treated SJCC as a school that was no longer participating in the Title IV programs. According to a memorandum in the record, the Department of Education appears to have informed Leida Blanco of SJCC that SJCC would be required to be “reinstated” to the Title IV programs in order to resume participation. During this time, the Department of Education did not consider SJCC able to obligate or commit funds that it had not earned before its closure. The Department of Education placed a “stop order” on SJCC’s reimbursement requests and did not process any reimbursement requests from SJCC from approximately mid-February, 1995 to July 10, 1995.

The record indicates that SJCC President, Mr. Reyes-Morales, received the “closed school” letter in March, 1995 and that no later than March 23, 1995 SJCC received notice that the Department of Education had placed it on the closed school list and ordered that Title IV funds not be disbursed to it. SJCC asserts that it did not receive the original February 14, 1995, letter indicating that the Department of Education considered SJCC “closed” until it requested a copy of the letter from Mr. MeKiernan at the Department of Education. Meanwhile, SJCC resumed classes on February 27, 1995. As soon as SJCC representatives became aware that the Department of Education had placed SJCC on the closed school list, the school began challenging this designation. From March, 1995 to June, 1995, SJCC repeatedly informed the Department of Education orally and in writing that SJCC had never closed, but had undergone a “brief, involuntary academic recess of classes,” and that it had resumed instruction.

SJCC also contacted Osvaldo Feliu Miranda, Director of the Offices for Licenses of the Consejo General de Educación de Puer-to Rico (Consejo), the agency that Mr. MeKiernan claimed had notified the federal Department of Education of SJCC’s alleged closure.3 Mr. Miranda denied to the De[451]*451partment of Education and SJCC that his office had communicated SJCC’s alleged closure to the Department of Education and he informed the Department of Education that the Consejo did not consider SJCC a closed school. Specifically, Mr. Miranda stated that “the decisions of the Federal Department of Education based on information that they received from the Treasury cannot be attributed to information offered by this office.” Moreover, Mr. Miranda sent an additional document to SJCC dated April 27, 1995, certifying that SJCC was a licensed college pursuant to Puerto Rico law. Mr. Miranda added that “[t]he period of time while the institution was being audited by the Secretary of Treasury does not constitute a Closing procedure under Puerto Rico Law and Regulations.” The Consejo is the appropriate licensing agency in Puerto Rico.

The Department of Education maintained SJCC on its closed school list for approximately five months. During this time, SJCC made repeated attempts to inform the Department of Education that it was conducting business and requested reinstatement. The Department of Education decided to take SJCC off the closed school list and allow participation in the Title IV programs effective July 24, 1995. All known written documentation explaining the Department of Education’s decision to take SJCC off the closed school list cites the fact that SJCC had only temporarily suspended classes and did not close. The Department of Education has reimbursed SJCC for all outstanding claims to Title IV funds for which the Department has determined entitlement for the period of time between February and July, 1995.

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74 Fed. Cl. 448, 2006 U.S. Claims LEXIS 358, 2006 WL 3411860, Counsel Stack Legal Research, https://law.counselstack.com/opinion/san-juan-city-college-inc-v-united-states-uscfc-2006.