United States District Court, E.D. Wisconsin
CERIA M. TRAVIS ACADEMY, INC., Plaintiff,
TONY EVERS, Defendant.
STADTMUELLER, U.S. DISTRICT JUDGE
plaintiff, Ceria M. Travis Academy, Inc.
(“Ceria”), brings this action against the
defendant, Tony Evers (“Evers”), individually and
in his official capacity as Wisconsin Superintendent of
Public Instruction, for violation of its Fourteenth Amendment
right to due process. (Docket #1). At the initiation of this
case, Ceria filed a motion for a preliminary injunction.
(Docket #3). Shortly thereafter, on June 10, 2016, Evers
filed a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6). (Docket #16). Because certain arguments
in the motion for a preliminary injunction were more fully
developed in the motion to dismiss briefing, the Court found
it prudent to address these matters together. Both motions
are now fully briefed and ready for disposition. (Docket #3,
#15, #18, #17, #19, #20). As discussed more thoroughly below,
the Court will grant Evers’s motion to dismiss in its
entirety and will, accordingly, deny Ceria’s motion for
a preliminary injunction as moot.
is a domestic non-stock corporation and 501(c)(3) entity duly
organized and existing under the laws of the State of
Wisconsin. (Compl. ¶ 7). Ceria operates a school, Ceria
M. Travis Academy (“Academy”), that provides
instruction to students from kindergarten through twelfth
grade.(Compl. ¶ 28). Evers is the Wisconsin
Superintendent of Public Instruction, which is the executive
of the Wisconsin Department of Public Instruction
(“DPI”). (Compl. ¶ 8). Evers is responsible
for administering and making payments under the Milwaukee
Parental Choice Program, pursuant to Wis.Stat. 119.23
(“Choice Program”). (Compl. ¶ 8).
Choice Program was first enacted by the Wisconsin legislature
in 1990. (Compl. ¶ 10). The program allows parents who
meet low income and residency requirements to choose to use
state funds to enroll their children in a private school
participating in the program instead of a Milwaukee public
school. (Compl. ¶ 11). As the State Superintendent,
Evers is responsible for making state payments to a school
participating in the Choice Program on behalf of the students
enrolled in the program. (Compl. ¶ 12).
a school year, schools participating in the Choice Program
incur costs associated with providing educational programming
instruction and related services to students enrolled in the
school. (Compl. ¶ 16). Pursuant to statute, for each
school year in which a school participates in the Choice
Program, Evers is responsible to pay the school an amount
calculated based on the amount of eligible pupils enrolled in
the school. (Compl. ¶ 17). This payment is divided into
four installments that are to be paid throughout the year,
one in September, one in November, one in February, and one
in May. (Compl. ¶ 18). DPI has an established payment
schedule to determine the amount of the quarterly payment
that is subject to adjustments authorized by law at the end
of the year. (Compl. ¶ 19).
year, a Choice Program School is required to have a financial
audit conducted by an independent certified public
accountant. The Choice School must submit the audit to DPI on
a form called the Financial Information Report.
(“FIR”) (Compl. ¶ 20). The FIR determines
the school’s total and per pupil costs for the prior
school year. (Compl. ¶ 21). After DPI reviews the FIR,
DPI issues a certified letter to determine whether it has
overpaid or underpaid the school during the prior year, and
adjustments are made between the school and DPI. (Compl.
¶ 22). Additionally, Choice Program schools are required
to submit an independent audit of the school’s student
enrollments that identifies ineligible pupils for whom the
school has received payment, the amount of payment received
for each such pupil, and additional eligible pupils
qualifying the private school for a payment. Those enrollment
audits are submitted to DPI. (Compl. ¶ 24). Upon review
of the September enrollment audit, DPI certifies an amount
due from the school for payments made to the school for
ineligible pupils, or amounts due to the school for
additional qualifying pupils. (Compl. ¶ 25).
school, the Academy, is currently a participant in the Choice
Program and has been a participant since 1997. (Compl. ¶
28). On September 22, 2014, DPI issued preliminary decisions
to prohibit the Academy from future participation in the
Choice Program and to withhold the quarterly payments from
the 2013-2014 school year. (Compl. ¶ 30). This decision
was allegedly made because the Academy’s independent
auditor failed to timely submit the FIRs for the 2013-2014
year. (Compl. ¶ 30). Ceria appealed the decision and
negotiated a settlement to allow the Academy to participate
in the Choice Program and receive the November 2014 payment
provided that Ceria met certain requirements. (Compl. ¶
31). On December 17, 2014, pursuant to this agreement, the
Academy posted a bond in the amount of $789, 222.00; this
bond remains in effect to date. (Compl. ¶ 32);
(Stipulated Facts ¶ 35, Docket #14).
September 1, 2015, the Academy timely submitted its FIR for
the 2014-2015 school year. (Compl. ¶ 47). On November
30, 2015, DPI issued a FIR certification letter for the
Academy for the 2014-2015 school year that found the
Academy’s per pupil cost for eligible programming was
$0.00. This finding required the Academy to repay in excess
of $2.9 million, which was the total amount previously paid
to the Academy for educational programming expenses under the
Choice Program during the 2014-2015 school year. (Compl.
¶ 48). In December 2015, Ceria and DPI entered into an
agreement allowing the Academy to submit a new FIR for the
2014-2015 school year and its January enrollment audit by
February 1, 2016. This agreement was later amended to allow
the submissions by March 1, 2016. (Compl. ¶ 51).
Additionally, the agreement allowed DPI to withhold from the
Academy a future Choice Program payment to be made in May of
2016 for the 2015-2016 school year if DPI overpaid the
Academy for the 2014-15 school year as a result of the
adjustment process. (Compl. ¶ 51).
Academy’s May quarterly payment for the Choice Program
for the 2016-2016 school year was calculated by DPI to be
$617, 307.00 based on prior enrollment reports. (Compl.
¶ 53). On March 2, 2016, the new auditors submitted the
Academy’s January Enrollment Audit to DPI, and on March
4, 2016, they submitted the Academy’s new 2014-15 FIR
to DPI. (Compl. ¶ 55). In the past, DPI has accepted
other FIRs and Enrollment Audits past the submission
deadlines. (Compl. ¶ 56).
March 14, 2016, DPI issued a new FIR certification letter.
(Compl. ¶ 57) The certification letter concluded that
DPI would withhold the May Payment of $617, 307.00 to
“net the overpayment” from the past years.
(Compl. ¶ 59). DPI issued both the November and March
certification letters without conducting an evidentiary
hearing. (Compl. ¶ 60). Both certification letters
stated that the Academy had a right to appeal to DPI, but if
they did not appeal, the certification letters would
“constitute the department’s final agency
decision” and that the Academy was required to exhaust
its administrative remedies. (Compl. ¶ 61).
March 25, 2016, Ceria filed an appeal with DPI and requested
a hearing with regard to the March and November certification
letters. (Compl. ¶ 62). On March 28, 2016, DPI referred
the appeal to the Wisconsin Division of Hearings and Appeals
(“DHA”) and requested a hearing examiner to
preside over a Class 2 hearing. (Compl. ¶ 63). On April
21, 2016, the parties, through their legal counsel, appeared
before DHA Administrative Law Judge Jennifer E. Nashold for a
Prehearing Telephone Conference. (Compl. ¶ 65). During
this conference, DPI, by its counsel, stated it intended to
withhold the May payment from the Academy for the stated
reason that DPI would never recover the money. (Compl. ¶
April 27, 2016, Ceria filed a motion to stay with ALJ Nashold
and requested an order staying DPI’s decision to
withhold the May payment. (Compl. ¶ 68). On May 10,
2016, the ALJ issued an order denying the motion to stay.
(Compl. ¶ 70). On May 23, 2016, the payments to the
Choice Program schools were processed into the State’s
payment system and DPI withheld the May $617, 307.00 payment
to Ceria. (Stipulated Facts ¶ 33, Docket #14). To date,
no evidentiary hearing has been held with respect to
Ceria’s March 25, 2016 appeal. (Stipulated Facts ¶
34, Docket #14) The Academy’s 2015-2016 school year
ended on June 3, 2016. (Stipulated Facts ¶ 36, Docket
motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) challenges the viability of a complaint by arguing
that it fails to state a claim upon which relief may be
granted.” Camasta v. Jos. A. Bank Clothiers,
Inc., 761 F.3d 732, 736 (7th Cir. 2014). When reviewing
a complaint, the Court construes it in the light most
favorable to the plaintiff, accepts as true all well-pleaded
facts alleged, and draws all reasonable inferences in the
plaintiff’s favor. See Foxxxy Ladyz Adult World,
Inc. v. Vill. of Dix, Ill., 779 F.3d 706, 711 (7th Cir.
survive a motion to dismiss under Rule 12(b)(6), “the
complaint must provide enough factual information to
‘state a claim to relief that is plausible on its
face’ and ‘raise a right to relief above the
speculative level.’” Id. (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570
(2007)); see Runnion ex rel. Runnion v. Girl Scouts of
Greater Chi. & Nw. Ind.,786 F.3d 510, 526 (7th Cir.
2015) (explaining that a plausible claim need only
“‘include enough details about the subject-matter
of the case to present a story that holds
together.’”) (quoting Carlson v. CSX Transp.,
Inc., 758 F.3d 819, 827 (7th Cir. 2014)). Thus, a