September 26, 2022

Volume XII, Number 269

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September 26, 2022

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Federal Court Rules Tax-Exempt Independent Schools Must Comply with Title IX

A recent federal court Title IX decision could affect private and independent schools nationwide. In Buttner-Hartsoe v. Balt. Lutheran High Sch. Ass’n, No. RDB-20-3229 (D. Md. July 21, 2022), five women brought a Title IX suit against their independent high school, alleging that the school failed to adequately address their complaints of sexual assault and harassment by male students. In response, the school argued that it was not subject to Title IX requirements because it was not a recipient of federal financial assistance and asked the court to dismiss the claims. On July 21, 2022, the Maryland federal court held that the school’s tax-exempt status under 26 U.S.C. § 501(c)(3) amounted to federal financial assistance and thus Title IX was applicable. Crucially, as a result of this holding, any independent school in Maryland with 501(c)(3) status must comply with Title IX and the mandates it imposes. 

The decision builds upon prior U.S. Supreme Court and federal court opinions on related subjects but appears to be the first court to establish this bright-line rule. For example, the decision relies upon Regan v. Taxation with Representation, a U.S. Supreme Court case from 1983, that equated a tax exemption to a “form of subsidy” equal to a cash grant. The Maryland court also finds support in Eleventh Circuit and Southern District of New York cases that contemplate whether tax exemption constitutes federal financial assistance as defined by Title IX. Buttner-Hartsoe takes these prior cases one step further by determining that a school’s tax-exempt status obligates Title IX compliance.

Although the tax-exempt status was enough to persuade the Maryland court of federal financial assistance, the court also noted that the school’s receipt of a Paycheck Protection Program (PPP) loan pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act separately imposed Title IX compliance for the duration of the loan. Consistent with our recent legal update on the North Carolina federal court decision Karanik et al. v. Cape Fear Academy, Inc., No. 7:21- CV-169D (E.D.N.C. June 17, 2022), more courts are considering PPP loans as acceptance of federal financial assistance.

While Buttner-Hartsoe currently only applies to schools in Maryland, it could indicate a growing trend in the Mid-Atlantic and Northeast to expand Title IX’s application to private and independent schools. Currently, private and independent schools not covered by Title IX often have non-discrimination policies in place, but to a less prescriptive degree. Title IX gives students and/or individuals another pathway to pursue claims of discrimination on the basis of sex. 

Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume XII, Number 223
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About this Author

Kathleen Dion, Robinson Cole Law Firm, Litigation Law Attorney, Hartford
Partner

Kathleen Dion, a member the firm's Litigation Section, focuses her practice on all aspects of civil and criminal litigation. She frequently handles cases related to education, government and internal investigations, and business disputes.

Education Law

Kate represents private schools, colleges, and universities in a variety of civil matters, such as tuition disputes, allegations of staff misconduct, and Title IX matters. She has assisted her clients in reaching favorable settlements in several employee...

860-275-8231
Sabrina Galli Corporate Litigation Attorney Robinson & Cole Law Firm
Associate

Sabrina Galli is a member of the firm’s Business Litigation Group. She represents corporate clients in general commercial litigation involving the assertion of and defense against claims for breach of contract, business torts, and similar business issues. Sabrina's experience includes federal and state court proceedings as well as arbitrations, mediations and settlement negotiations.

Prior to entering private practice, Sabrina served as a law clerk for the Honorable Robert Lougy, Presiding Judge of the Superior Court of New Jersey, Chancery...

212.451.2985
Seth B. Orkand Business Litigation Attorney Robinson Cole
Partner

Seth B. Orkand focuses his practice on white-collar criminal defense, government and corporate internal investigations, research misconduct investigations, college and university disciplinary actions, and complex commercial litigation. He is a member or the firm’s Business Litigation Group. 

Government Enforcement and White-Collar Criminal Defense

Seth’s experience includes representation of individuals and corporations in federal and state white-collar criminal matters as well as a variety of...

617-557-5915
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