Federal District Court Holds that Receiving a PPP Loan Qualifies as Federal Financial Assistance under Title IX
July 14, 2022
In June, a Federal District Court in North Carolina ruled that a private high school may be liable under Title IX because it accepted a Paycheck Protection Program Loan (PPP) the same year the discriminatory conduct occurred.
In 2021, three plaintiffs sued Cape Fear Academy (“CFA”), alleging that the school had discriminated against them “on the basis of sex in violation of Title IX.” According to the complaint, the school also unlawfully retaliated against them when conduct was brought to the school’s attention. The plaintiffs also claim that in the 2020-2021 academic year, CFA received a PPP loan that qualified as “federal financial assistance” under Title IX. In its motion for summary judgment, CFA argued that the “PPP loan was not federal assistance” and that Title IX did not apply to CFA during the 2020-2021 school year. Ultimately, the court disagreed with CFA.
Under Title IX, “no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.” The regulations define federal financial assistance as “a grant or loan of Federal financial assistance,” and any “contract, agreement, or arrangement” that contains any provision “of assistance to any education program or activity.” The court reasoned that the loan CFA received meets this definition because a PPP loan qualifies as “[a] grant or loan of federal assistance,” and is awarded through a formal “loan program.” Furthermore, when CFA accepted the loan, it agreed to “not discriminate in any business practice, including employment practices.” The court also noted that even though the PPP loan was issued by private lenders, it was still federal assistance because a purpose of the loan involves the “provision of assistance to any education program or activity.” For these reasons, the court concluded that CFA did in fact receive federal financial assistance during the 2020-2021 academic year and “had to comply with Title IX for the life of the loan.”
This case is particularly noteworthy because it addressed sex discrimination, retaliation, and a core tenet of Title IX – federal financial assistance. While the court commended CFA’s argument, the opinion provides a comprehensive analysis on how courts evaluate whether funds qualify as a loan under Title IX. Although CFA is a private institution, this case highlights how institutions may be liable under Title IX if they received the right loan at the right time.
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