501(c)(3) Status Subjects an Independent School to Title IX: What You Need to Know About Buettner-Hartsoe v. Baltimore Lutheran High School Association d/b/a Concordia Preparatory School

On July 21, 2022, Judge Bennett of the United States District Court for the District of Maryland held that an independent school in Maryland was a recipient of federal funding and therefore subject to Title IX due to the school’s status as a 501(c)(3) tax-exempt organization. This ruling represents a seismic shift in compliance obligations for independent schools, many of which do not accept federal aid and have not been considered subject to federal anti-discrimination laws such as Title IX.

Independent schools have not generally been subject to Title IX unless they received “federal financial assistance.” Title IX defines “federal financial assistance” to include federal grants or loans and any other contract, agreement, or arrangement that has as one of its purposes the provision of assistance to any education program or activity.  Aside from receiving PPP loans during the pandemic, many independent schools have not historically received federal funds. As a result, while independent schools typically have policies in place to address discrimination and sexual misconduct, they have not been subject to certain federal anti-discrimination law requirements such as those under Title IX.

In the Maryland case, several former students sued Concordia Preparatory School (“CPS”), a private school in Maryland, under Title IX, alleging that the school failed to adequately address numerous complaints of peer-on-peer sexual assault and sexual harassment. In response, CPS sought to dismiss the lawsuit on the grounds that it was not subject to Title IX because it did not receive federal funding during the timeframe of the alleged sexual misconduct. The court refused to dismiss the Title IX claim, holding that CPS was subject to Title IX by virtue of its 501(c)(3) status even if did not otherwise receive direct federal aid.  In doing so, the court found that the school’s tax-exempt status was a form of federal financial assistance. Further, the court held, “Enforcing the mandates of Title IX in schools with 501(c)(3) status aligns with and protects the principal objectives of Title IX: ‘to avoid the use of federal resources to support discriminatory practices’ and ‘to provide individual citizens effective protection against those practices.’”

While the Maryland District Court’s decision only applies to one independent school, CPS, the opinion does have potentially significant ramifications for non-profit independent schools throughout the country. Specifically, courts in other jurisdictions may apply the same reasoning as the Maryland District Court if a non-profit independent school is sued under Title IX or other federal anti-discrimination laws (Section 504 of the Rehabilitation Act, Title VI). Indeed, on July 25, 2022, the United States District Court for the Central District of California, similarly held that a private religious school’s tax-exempt status confers a federal financial benefit that obligates compliance with Title IX.

These recent decisions from Maryland and California may still be appealed so the issue of whether tax-exempt status constitutes federal financial assistance is far from settled. Though it may be too soon to predict how these rulings will impact all independent schools, it is cause for schools to carefully consider their current compliance with federal anti-discrimination laws.

Some independent schools may already be reviewing their policies for Title IX compliance in response to their receipt of a PPP loan. We encourage you to review our recent client alert on this topic and consider whether to keep those policies given the Maryland District Court’s ruling.

Please also be informed: The Department of Education has released proposed changes to the current Title IX regulations. It is anticipated that the final form of the proposed changes will not be issued for about another year, however, schools should consider how these changes will impact their existing sexual harassment policies.

Our Investigations & Resolutions Team will update this guidance as we learn more about the implications of these rulings. We encourage you to consult with our Investigations & Resolutions Team, including Kai McGintee and Amanda Ames, if you have any questions about this recent legal development.