Memorandum on Potential Financial Liability and Ministerial Duty Re: InfiLaw Application for License to Operate the Charleston School of Law William Want May 12, 2014 I of9

Memorandum as to Whether the CHE and Its Commissioners Face Potential Liability if They Deny InfiLaw's License Application And Whether the CHE Has a Ministerial Duty to Issue the License

The question addressed in this memorandum is whether the South Carolina Commission

on Higher Education (CHE) and individual Commissioners of CHE may be held financially

liable for not approving InfiLaw's application for a license to operate the Charleston School of

Law (CSOL ). This memorandum also addresses a letter from a State Representative urging the

CHE to issue the permit because the granting of a business license allegedly is a ministerial

function and as such the CHE has no option except to issue the license.

I. NEITHER THE CHE OR ITS COMMISSIONERS MAY BE HELD FINANCIALLY LIABLE FOR DENYING INFILA W'S LICENSE APPLICATION

The answer to the question whether the CHE or its Commissioners may be held

financially liable for denying InfiLaw's license application is no. State governmental entities and

officials are generally not subject to financial liability for their official actions or decision-

making. There are two circumstances in which they may be held liable, neither of which is

present here. First, states throughout the country, including South Carolina, possess what is

called sovereign immunity from lawsuits. All states to a substantial extent have waived this

general immunity, but they all have exemptions from liability relating to government decision-

making. The exemptions in the South Carolina statute clearly foreclose liability here. The second

possible source of financial liability is the federal statute, 42 U.S.C. § 1983, which allows for

such liability in certain egregious cases where the governmental action violates the United States

Constitution or federal law.

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A. The S.C. Tort Claims Act Exempts Governmental Entities and Officials from Financial Liability for Their Official Actions

In South Carolina, the statute authorizing suits against the government and governmental

officials is the state's Tort Claims Act (TCA), S.C. Code § 15-78-10 to 200 (2005). Explaining

potential liability under the TCA, South Carolina Jurisprudence states:

Generally, public officials enjoy immunity from private causes of action under the public duty rule, which holds that public officials are generally not liable to individuals for their negligence in discharging public duties because the duty is owed to the public at large rather than anyone individually.

8 S.C. Jur., Public Officers and Public Employees,§ 71 (2014).

This general rule stems from one ofTCA's statements of purpose and several other TCA

provisions. TCA states as one general purpose granting "the State, its political subdivisions, and

employees, while acting within the scope of official duty, immunity from liability and suit for

any tort except as waived by this chapter." S.C. Code Ann.§ 15-78-20(b) (2005). TCA

accomplishes that purpose through several more specific provisions, one of which provides:

Nothing in this chapter may be construed to give an employee of a governmental entity immunity from suit and liability if it is proved that the employee's conduct was not within the scope of his official duties or that it constituted actual fraud, actual malice, intent to harm, or a crime involving moral turpitude.

S.C. Code Ann.§ 15-78-70(b) (2005).

Another provision of TCA providing an exemption from liability here states the

governmental entity is not liable for a loss resulting from:

licensing powers or functions including, but not limited to, the issuance, denial, suspension, renewal, or revocation of or failure or refusal to issue, deny suspend, renew, or revoke any permit, license, certificate, approval, registration, order, or similar authority except when the power or function is exercised in a grossly negligent manner. ...

S.C. Code Ann.§ 15-78-60(12) (2005).

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Yet another provision of TCA provides that a governmental entity is not liable for a loss

resulting from:

the exercise of discretion or judgment by the governmental entity or employee or the performance or failure to perform any act or service which is in the discretion or judgment of the governmental entity or employee ....

S.C. Code Ann.§ 15-78-60(5) (2005).

Other provisions of TCA reinforce these specific provisions in foreclosing financial

liability on the CHE or its Commissioners for denying InfiLaw's license application. One

provision states:

This chapter constitutes the exclusive remedy for any tort committed by an employee of a governmental entity. An employee of a governmental entity who commits a tort while acting within the scope of his official duty is not liable thereof except as expressly provided for in subsection (b ).

S.C. Code§ 15-78-70(a) (2005).

Another TCA provision states:

The provisions of this chapter establishing limitations on and exemptions to the liability of the State, its political subdivisions, and employees, while acting within the scope of official duty, must be liberally construed in favor oflimiting the liability of the State.

S.C. Code Ann.§ 15-78-20(f) (2005).

In summary, TCA is the South Carolina law that both allows the government to be liable

generally and provides exemptions from that liability. Multiple provisions ofTCA clearly

exempt the CHE and its Commissioners from liability ifthe Commission denies InfiLaw's

application.

A. 42 U.S.C. § 1983 Does Not Provide for Financial Liability in This Case

The other possible source for financial liability against the CHE and its Commissioners is

the federal statute 42 U.S.C. § 1983 which provides:

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Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress ....

42 U.S.C. § 1983 (2006). Section 1983 effectively "creates a [Federal] cause of action against

any person who, acting under color of state law, abridges rights created by the Constitution and

laws of the United States." Elwin Chemerinsky, Federal Jurisdiction at 498 (6th ed. 2012).

First, as to the CHE itself, the Eleventh Amendment of the United States Constitution bans

citizen suits to obtain money damages from state governmental entities. The South Carolina TCA

states as to this Eleventh Amendment immunity: "Nothing in this chapter is construed as a

waiver of the state's or political subdivision's immunity from suit in federal court under the

Eleventh Amendment to the Constitution of the United States nor as consent to be sued in any

state court beyond the boundaries of the State of South Carolina." S.C. Code Ann.§ 15-78-20(e)

(2005).

As to CHE Commissioners, under the doctrine of qualified immunity from Section 1983

liability, "government officials are not subject to liability for the performance of their

discretionary actions unless their conduct violates clearly established statutory or constitutional

rights which a reasonable person would have known." Hamad, Glenda K. et al., Absolute or

Qualified Immunity, 14A C.J.S. Civil Rights§ 451 (2014). The Supreme Court has said, "The

basic thrust of the qualified-immunity doctrine is to free officials from the concerns of

litigation .... " Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953 (2009). Commenting further on the

doctrine, the Supreme Court stated in another case that under Section 1983 officials "will not be

liable for mere mistakes in judgment, whether the mistake is one of fact or one oflaw .... " Butz

v Economou, 438 U.S. 478, 479 (1978). South Carolina courts have recognized the limited

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nature of Section 1983 liability. According to the South Carolina Court of Appeals: "Claims

under 42 U.S.C. § 1983 are not available for all alleged torts of state officials or injuries

allegedly suffered at the hands of state officials. Rather, such claims are limited to violations of

rights protected by the United States Constitution and federal law." Quillian v. Evatt, 315 S.C.

489, 491, 445 S.E.2d 639, 640 (S.C. App. 1994).

lnfiLaw may claim that it has met all of the specific criteria set forth in the South

Carolina statute for the CHE deciding licensing matters and that to deny it a license under this

circumstance would constitute a taking under the 14'11 of Amendment of the United States

Constitution that prohibits states from taking property without payment of just compensation.

lnfiLaw would, however, face serious obstacles, some of them unsurmountable, to making this a

successful Section 1983 claim. First, it would have to demonstrate that it is correct that the

Commission has no discretion except to grant the permit in this case because lnfiLaw allegedly

meets all of the statutory criteria. Next, it would have to demonstrate that the permit denial

"violates clearly established ... constitutional rights which a reasonable person would have

knovm." Hamad, Glenda K. et al., Absolute or Qualified immunity, 14A C.J.S. Civil Rights,

supra, § 451.

Peter Wilborn submitted a memorandum to the CHE on February 26, 2014, showing that

the CHE had statutory authority to deny lnfiLaw' s application on several bases. While the statute

names a number of specific criteria for evaluating license applications, it does not limit the CHE

to just those specific criteria or mandate that the license be issued upon meeting those

specifically named criteria. The first provision regarding CHE's licensing criteria states: "The

Commission may license the institution after the investigation has revealed that the institution

and its programs have met the following criteria .... "(Emphasis supplied). Thus, those

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specifically named criteria are not the exclusive ones to which the Commission is limited. Mr.

Wilbom's memorandum also shows that the specific criteria listed add up to the more general

criteria of awarding a license only where it is in the best interests of the state.

Additionally, Mr. Wilbom's memorandum shows that the CHE developed and applied

criteria in addition to those specifically noted in the CHE statute in determining whether to issue

the original license to the Charleston School of Law. Creating these additional criteria is

consistent with the CHE statute which after naming specific criteria by which to judge an

application states: "The institution shall comply with such additional criteria as may be required

by the Commission." S.C. Code Ann. § 62-6(S) (2012). Those additional criteria included

detennining what is in "the best interest of the state," that there by a commitment by the school

to quality, that there be employment opportunities for the school's graduates, the "long-te1m

benefit to South Carolina," and that the "school not be organized to sell it at a later date."

Surely, considering all these bases upon which InfiLaw's application can be judged, it is

at least reasonably arguable that there is no mandatory duty for the Commission to issue the

license and if the license should have been issued under the legal criteria that the CHE would

have simply misinterpreted its authority, not violated "clearly established statutory or

constitutional rights which a reasonable person would have known." There is no precedent for

such a ruling in a license or pennit denial case analogous to the instant one. Permit and license

denials cases are constantly decided in South Carolina courts, courts in other states and in federal

courts. The remedy for an agency or commission illegally denying a license or permit is for the

court to remand the case to the agency with instructions that the license or permit be issued and

that would be the potential remedy in this case if InfiLaw demonstrated it was entitled to the

permit. Whereas both the South Carolina TCA and Section 1983 provide avenues by which

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governmental entities and officials can be held financially liable in extreme circumstances,

neither applies here because the CHE's only option under state law is not to grant InfiLaw a

license and the failure to do so does not constitute a violation of a clearly established

constitutional right.

II. THE CASE CITED BY REPRESENTATIVE BEDINGFIELD AS REQIDRING THE CHE TO ISSUE THE LICENSE AS A MINISTERIAL FUNCTION ACTUALLY UPHOLDS THE CHE'S AUTHORITY TO DENY IT

In a letter of February 7, 2014, from Representative Eric Bedingfield to members of the CHE

and its Executive Director, concurred in by twelve other representatives, Representative

Bedingfield urged the CHE grant InfiLaw's license application. He cited the following two

bases: the policy one of preventing the use of public resources to operate another law school in

South Carolina and the legal one that granting this license was a ministerial function that the

CHE was required to do. As to the latter basis, the letter stated, "As you know, the Commission

does not have any discretion to withhold a license if an applicant satisfied the statutorily

prescribed standards for obtaining the license." He supported this statement with the following

partial quotation from a S.C. Supreme Court decision joined by a school statement of his own:

"'The granting of a license to engage in a trade, business or profession is a ministerial function,'

not one that permits an agency to make subjective judgments or exercise discretion regarding an

application. Bd. of Bank Control v. Thompson, 236 S.C. 158, 165, 113 S.E.2d 544, 547 (1960)."

As is clear from the detailed discussion above that the CHE and its Commissioners are

not potentially financial liable in this case, Representative Bedingfield's argument is absolutely

incorrect if it is intended to demonstrate such liability. It is equally incorrect as to supporting the

view that a Court might overturn the CHE's denial oflnfiLaw's license application. The easiest

way to show this is to point out that the very case upon which Representative Bedingfield relies

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to argue that the CHE must grant the license in fact upheld the state agency's permit denial.

Because the question of the CHE's authority to deny the license is of so much importance, a

more detailed analysis of the case is provided.

In Barad of Bank Control v. Thompson, the State Board of Bank Control denied the

application of Fidelity Finance Company for a license to conduct a small loan business in the

City of Spartanburg. The Court noted the following three criteria established by statute in

question for the Board to employ in making its decision: (1) the applicant's financial

responsibility, experience and general fitness, (2) that there be adequate funding and (3) that the

convenience of the community be promoted. The Board denied the permit on the basis of the

third factor. The Court made reference to the fact that the Board was a ministerial board and as

such, must "act as fact-finding bodies to ascertain whether applicants conform to a legislative

formula by which the right to a license is fixed." Id. at 165. Because it was a ministerial rather

than judicial function, the Court determined it had very little authority to overturn the decision of

the Board.

That's right, as used in this case, the ministerial as opposed to judicial nature of the action

made the Board's decision less subject to review and reversal by a court. According to the

Court: "It is our view that the function vested by the Act in the State Board of Bank Control of

determining whether a license should be issued as to the applicant is non-judicial in nature .... In

line with the above mentioned, we think Section 8-794.163 [the statute in question] should be

construed as providing for only limited review." Id. at 166. Similarly, the Court stated: 'The

Board of Bank Control was selected as having the necessary competence in this field." Id. at 169.

To reiterate, the South Carolina Supreme Court ruled in Board of Bank Control that Boards in

exercising their ministerial functions act "as fact-finding bodies to ascertain whether applicants

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conform to a legislative formula" and the decisions of the Boards are to be given great deference

by the Courts.

The use of a more than 50-year old .case to support the proposition that the CHE allegedly

has a mandatory duty to grant Infi.Law's permit application is apparently the best that could be

done. Upon analysis of this case, however, it is seen that it does not support the requirement that

CHE issue the license, but rather provides the CHE broad discretion to make the decision it

thinks is consistent with its statutory mandate.

CONCLUSION

The argument that CHE and its Commissioners must grant InfiLaw's license application

or face financial liability is without merit as is the argument of Representative Bedingfield that

the CHE has a ministerial or mandatory duty to issue the license. These specious arguments

hopefully will not succeed in bullying the CHE to do anything other than decide what is in the

best interests of the state applying the statutory criteria and the criteria developed by the CHE

under its statutory authority.

May 12, 2014

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Respectfully submitted,

William L. Want 15 Bull Street Charleston, SC 29401 wwant@aol.com