Arizona State Board for Charter Schools v. U.S. Department of Education

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ARIZONA STATE BOARD FOR CHARTER 

SCHOOLS; EXCEL EDUCATION CENTERS,

INC., an Oregon corporation; PHOENIX

EDUCATION MANAGEMENT, LLC, a

Delaware limited liability company;

INTELLI-SCHOOL, INC., an Arizona

corporation; PAS CHARTER, INC., an

Arizona corporation; SC JENSEN

CORPORATION, INC., an Arizona

corporation; RSD CHARTER SCHOOL,

INC.,

Plaintiffs-Appellants,

and

LEONA GROUP ARIZONA, LLC, an No. 05-17349

Arizona limited liability company;

GAR LLC, an Arizona limited  D.C. No.

CV-05-01809-FJM

liability company; BRIGHT OPINION

BEGINNINGS SCHOOL, INC., an Arizona

corporation; OMBUDSMAN

EDUCATIONAL SERVICES, LTD., an

Illinois corporation; MONTESSORI

SCHOOLHOUSE OF TUCSON, INC., an

Arizona corporation,

Plaintiffs,

v.

U.S. DEPARTMENT OF EDUCATION;

MARGARET SPELLINGS, in her official

capacity as Secretary of the U.S.

Department of Education,

Defendants-Appellees. 

11937

11938 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

Appeal from the United States District Court

for the District of Arizona

Frederick J. Martone, District Judge, Presiding

Argued and Submitted

August 18, 2006—San Francisco, California

Filed September 25, 2006

Before: Michael Daly Hawkins and Sidney R. Thomas,

Circuit Judges, and Jeffrey T. Miller,* District Judge.

Opinion by Judge Hawkins

*The Honorable Jeffrey T. Miller, United States District Judge for the

Southern District of California, sitting by designation.

11940 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

COUNSEL

William A. Richards, Arizona Office of the Attorney General,

Phoenix, Arizona, for plaintiff-appellant Arizona State Board

for Charter Schools.

David D. Garner, Phoenix, Arizona, for plaintiffs-appellants

Charter Schools Excel Education Centers, Inc., Phoenix Edu-

cation Management LLC, Intelli-School, Inc., PAS Charter,

Inc., SC Jensen Corporation, Inc., and RSD Charter School,

Inc.

Isaac J. Lidsky, Department of Justice, Civil Division, for the

defendants-appellees.

OPINION

HAWKINS, Circuit Judge:

We face a question of statutory interpretation that boils

down to the meaning of the word “including.” The parties

offer differing interpretations of two federal statutes that

define the type of school eligible to receive specific federal

funds as “a nonprofit institutional day or residential school,

including a public [elementary or secondary] charter school,

that provides [elementary or secondary] education, as deter-

mined under State law.”1 The district court, in a carefully

written and thoughtful opinion, construed “including” to

mean, essentially, “such as.” Because this construction is con-

sistent with the plain meaning of the language employed by

Congress, the legislative history surrounding these provisions,

and the reasonable interpretation given the language by the

1

Individuals with Disabilities Education Act (“IDEA”), 20 U.S.C.

§ 1401 (6), (27) (2004); Elementary and Secondary Education Act of 1965

(“ESEA”), 20 U.S.C. § 7801(18), (38) (2002).

ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC. 11941

agency Congress directed to supervise the distribution of the

funds at issue, we affirm.

I. Background

A. Statutory Framework

The IDEA and the ESEA authorize the U.S. Department of

Education (“Department”) to distribute grants to the States

through a state educational agency (“SEA”), such as the Ari-

zona Department of Education (“ADE”). See 20 U.S.C.

§§ 1411 (IDEA), 6332-33 (ESEA). The statutes further autho-

rize an SEA to distribute the grant money through subgrants

to a local educational agency (“LEA”), which is defined as “a

public board of education or other public authority legally

constituted within a State for either administrative control or

direction of, or to perform a service function for, public ele-

mentary schools or secondary schools . . . .” 20 U.S.C.

§§ 1401(19)(A) (IDEA), 7801(26)(A) (ESEA).2

Under the IDEA and the ESEA, an “elementary school” is

defined as “a nonprofit institutional day or residential school,

including a public elementary charter school, that provides

elementary education, as determined under State law.” 20

U.S.C. §§ 1401(6) (IDEA), 7801(18) (ESEA) (emphasis

added). Similarly, the statutes define a “secondary school” as

“a nonprofit institutional day or residential school, including

a public secondary charter school, that provides secondary

education, as determined under State law . . . .” 20 U.S.C.

§§ 1401(27) (IDEA), 7801(38) (ESEA) (emphasis added).

B. Procedural History

In 2003, the Department’s Office of Inspector General

2

Arizona considers entities that operate charter schools to be LEAs for

purposes of receiving and administering funds under these federal pro-

grams.

11942 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

audited the ADE’s distribution of federal funds and concluded

that the ADE had improperly awarded ESEA and IDEA funds

to for-profit entities that operated charter schools in Arizona.

After reviewing the ADE’s response, the Department issued

a final determination to resolve the audit. The Department

found that the “definitions clearly provide that an elementary

or secondary school must be non-profit,” and interpreted the

“ ‘including’ clauses to be illustrative of eligible non-profit

schools, not to contradict the requirement that they be non-

profit.” On this basis, the Department determined that Arizo-

na’s for-profit charter schools were ineligible for federal fund-

ing, concluding that their for-profit status precluded them

from qualifying for subgrants as LEAs.

The Arizona State Board for Charter Schools and several

for-profit charter school operators (jointly, “Arizona Charter

Board”) unsuccessfully petitioned the Department to recon-

sider its determination and subsequently sought review in dis-

trict court. The district court determined that the statutes

unambiguously “express[ ] the congressional mandate that in

order to be eligible for federal funds, charter schools must be

nonprofit,” and that even if the statutes were ambiguous, the

Department’s construction was reasonable and entitled to

Chevron deference. Ariz. State Bd. for Charter Sch. v. U.S.

Dep’t of Educ., 391 F. Supp. 2d 800, 804 (D. Ariz. 2005).

This timely appeal followed.

II. Standard of Review

[1] We review both a district court’s grant of summary

judgment and questions of statutory interpretation de novo.

Robi v. Reed, 173 F.3d 736, 739 (9th Cir. 1999); Wilderness

Soc’y v. Dombeck, 168 F.3d 367, 370 (9th Cir. 1999). When

reviewing an agency’s interpretation of a statute it is charged

with administering, we look first “to the statutory text to see

whether Congress has spoken directly to the question at hand.

‘If the intent of Congress is clear, that is the end of the matter;

for the court, as well as the agency, must give effect to the

ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC. 11943

unambiguously expressed intent of Congress.’ ” Contract

Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145, 1146-47 (9th Cir.

2006) (quoting Chevron, U.S.A., Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837, 842-43 (1984)). Thus, “[t]he lan-

guage of a statute is controlling when the meaning is plain

and unambiguous.” United States v. Maria-Gonzalez, 268

F.3d 664, 668 (9th Cir. 2001).

Conversely, if the statute is uncertain or ambiguous, we

“cannot simply impose our own construction.” United States

v. Lopez-Perera, 438 F.3d 932, 935 (9th Cir. 2006). Rather,

under Chevron, we defer to the agency’s interpretation if it is

based on “a permissible construction of the statute.” 467 U.S.

at 843. However, interpretations embodied in opinion letters,

policy statements, agency manuals, and enforcement guide-

lines — “all of which lack the force of law — do not warrant

Chevron-style deference.” Christensen v. Harris County, 529

U.S. 576, 587 (2000). Instead, such views are entitled to Skid-

more deference “insofar as they ‘constitute a body of experi-

ence and informed judgment to which courts and litigants

may properly resort for guidance.’ ” Vigil v. Leavitt, 381 F.3d

826, 835 (9th Cir. 2004) (quoting Skidmore v. Swift & Co.,

323 U.S. 134, 140 (1944)). In other words, “ ‘[c]ogent admin-

istrative interpretations . . . not the products of formal rule-

making nevertheless warrant respect.’ ” Id. at 835 (quoting

Alaska Dep’t of Envtl. Conservation v. E.P.A., 540 U.S. 461,

488 (2004)). As the Supreme Court noted: “The fair measure

of deference to an agency administering its own statute has

been understood to vary with circumstances, and courts have

looked to the degree of the agency’s care, its consistency, for-

mality, and relative expertness, and to the persuasiveness of

the agency’s position.” United States v. Mead Corp., 533 U.S.

218, 228 (2001) (footnotes omitted).

III. Discussion

A. Plain Meaning

We first evaluate whether the meaning of the statutes is

plain and unambiguous and, therefore, controlling. See Maria-

11944 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

Gonzalez, 268 F.3d at 668. To determine whether Congress

has directly spoken to the issue, we “employ the traditional

tools of statutory construction.” Student Loan Fund of Idaho,

Inc. v. U.S. Dep’t of Educ., 272 F.3d 1155, 1165 (9th Cir.

2001) (internal quotation omitted). These tools of construction

require us:

first to engage in a textual analysis of the relevant

statutory provisions and to read the words of a stat-

ute in their context and with a view to their place in

the overall statutory scheme. If the proper interpreta-

tion is not clear from this textual analysis, the legis-

lative history offers valuable guidance and insight

into [c]ongressional intent. However, it is well estab-

lished that legislative history which does not demon-

strate a clear and certain congressional intent cannot

form the basis for enjoining regulations.

Id. (citations and quotation marks omitted). In conducting this

analysis, we are not vested with the power to rewrite the stat-

utes, but rather must “construe what Congress has written. . . .

It is for us to ascertain — neither to add nor to subtract, nei-

ther to delete nor to distort.” 62 Cases, More or Less, Each

Containing Six Jars of Jam v. United States, 340 U.S. 593,

596 (1951); Xi v. INS, 298 F.3d 832, 839 (9th Cir. 2002) (“[A]

decision to rearrange or rewrite [a] statute falls within the leg-

islative, not the judicial, prerogative.”).

[2] Here, the meaning of the statutes is both plain and

unambiguous. A natural reading establishes that only “non-

profit institutional day or residential school[s]” are eligible for

federal funding under the ESEA and the IDEA. Arizona Char-

ter Board seeks to introduce an alternative interpretation,

arguing that the subsequent term “including” expands, rather

than simply illustrates, the definition of eligible schools. In

both legal and common usage, the word “including” is ordi-

narily defined as a term of illustration, signifying that what

follows is an example of the preceding principle. See Fed.

ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC. 11945

Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95,

100 (1941) (“[T]he term ‘including’ is not one of all-

embracing definition, but connotes simply an illustrative

application of the general principle.”).3 Using a common-

sense construction of the statutes, the term “including” indi-

cates that “public . . . charter school” is an illustrative subset

of the preceding principle: “nonprofit” school. Thus, a natural

reading of the text conveys clear congressional intent that all

schools, including charter schools, must be nonprofit to

receive IDEA and ESEA funds.

Arizona Charter Board urges that we interpret “including”

to mean “and” or “in addition to” in order to reconcile con-

flicting terms. Specifically, they contend that the term “non-

profit . . . school” conflicts with “a public . . . charter school”

because, under Arizona law, the latter includes both nonprofit

and for-profit institutions. In such circumstances, Arizona

Charter Board argues, courts have interpreted “including”

broadly to be synonymous with “and.” Such a reading, of

course, would allow all for-profit public charter schools to

receive funding, despite the preceding “nonprofit” require-

ment.

But well-accepted rules of statutory construction caution us

that “statutory interpretations which would produce absurd

results are to be avoided.” Ma v. Ashcroft, 361 F.3d 553, 558

(9th Cir. 2004). When a natural reading of the statutes leads

to a rational, common-sense result, an alteration of meaning

is not only unnecessary, but also extrajudicial. See Xi, 298

F.3d at 839 (courts cannot rewrite a statute). Alternatively,

courts avoid natural readings that would lead to irrational

3

The American Heritage Dictionary of the English Language (4th ed.

2000), available at http://www.bartleby.com/reference, defines “include”

as “[t]o take in as a part, element, or member[; t]o contain as a secondary

or subordinate element[; t]o consider with or place into a group, class, or

total.” Similarly, Black’s Law Dictionary defines it as “[t]o contain as a

part of something[; t]he participle including typically indicates a partial

list.” 777-78 (8th ed. 2004).

11946 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

results. See, e.g., Amalgamated Transit Union Local 1309,

AFL-CIO v. Laidlaw Transit Serv., Inc., 435 F.3d 1140, 1146

(9th Cir. 2006) (replacing the word “less” with “more”).

It is true that some courts have interpreted “including” to

mean “and” or “in addition to,” where the exclusivity of two

or more terms requires a broader interpretation to avoid an

irrational or absurd result. See, e.g., Adams v. Dole, 927 F.2d

771, 777 (4th Cir. 1991) (explaining, by analogy: “If we say

that ‘all licensed drivers, including applicants for driver’s

licenses, shall take an eye exam,’ the word ‘including’ means

‘and’ or ‘in addition to’ . . . [because] a ‘licensed driver,’ by

definition, excludes an ‘applicant,’ and therefore if we intend

to include applicants we must say so.”); Liverpool v. Balti-

more Diamond Exch., Inc., 799 A.2d 1264, 1273-74 (Md.

2002). Here, the terms “nonprofit” and “public . . . charter

school” do not require this alternative interpretation because

their natural meaning is both rational and clear. Arizona’s def-

inition of the term “public . . . charter school” includes both

nonprofit and for-profit charter schools. As a result, the term

is neither mutually exclusive nor incompatible with the term

“nonprofit.” Instead, a logical and natural reading of the stat-

utes indicates that the definition includes the subset of charter

schools that complies with the preceding nonprofit principle,

while excluding the subset that violates the nonprofit require-

ment.

[3] The alternative reading urged on us would replace a

rational interpretation with one that is plainly counterintuitive:

that the term “nonprofit” school somehow includes for-profit

institutions. This interpretation would impute meaning not

apparent from a natural reading of the text and essentially

rewrite the statute to read, “a nonprofit . . . school, including

a [for-profit] public . . . charter school.” Given such an unnec-

essarily expansive result, absent more explicit guidance or

indication from Congress, the natural reading of the statute —

limiting funding to nonprofit charter schools — must control.

ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC. 11947

B. Legislative History

The legislative history validates the district court’s interpre-

tation. Originally, the definitions of “elementary” and “sec-

ondary” schools in the IDEA and the ESEA referred broadly

to all “day or residential schools,” but in the Improving Amer-

ica’s Schools Act of 1994, Congress added the qualifying

words “nonprofit” and “institutional” to the ESEA definitions.

Pub. L. No. 103-382, 108 Stat. 3518, 3888, 3890 (1994).4

Four years later, Congress again amended the ESEA defini-

tions, inserting the term “including a public . . . charter

school,” but left the general nonprofit requirement intact.

Charter School Expansion Act of 1998, Pub. L. No. 105-278,

112 Stat. 2682, 2689 (1998).5

The initial modification conveyed Congress’s clear intent

to exclude for-profit schools from IDEA and ESEA funding.

The subsequent amendments adding “public . . . charter

school” to the definitions did not purport to modify or elimi-

nate this initial requirement. Because the “charter school”

amendment postdated the “nonprofit” amendment, Congress

had an opportunity to be explicit had it intended to alter the

nonprofit provision. Without any such explication, the textual

evolution affirms Congress’s clear intent to prohibit the fund-

ing of for-profit schools, charter or otherwise.

[4] A closer inspection confirms this interpretation as the

legislative history lacks any indication that Congress

intended, through these amendments, to obviate the earlier-

established “nonprofit” qualifier. The Charter School Expan-

4

Congress made parallel changes to the IDEA definitions in 1997.

IDEA Amendments of 1997, Pub. L. No. 105-17, 111 Stat. 37, 43, 45

(1997).

5

Congress later amended the IDEA definitions as well, without any

change to the “nonprofit” requirement. Individuals with Disabilities Edu-

cation Improvement Act of 2004, Pub. L. No. 108-446, 118 Stat. 2647,

2653, 2657 (2004).

11948 ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC.

sion Act of 1998, which first introduced the phrase “including

a public . . . charter school,” sought to “expand[ ] the number

of high-quality charter schools available to students across the

Nation.” Pub. L. No. 105-278, 112 Stat. at 2682 (amending

the “Purpose” Section of the ESEA). The plain meaning of

the statutes, barring for-profit charter schools from federal

funding, is wholly consistent with this purpose; ensuring that

nonprofit charter schools receive ESEA and IDEA funds

markedly assists the nationwide expansion of charter schools.

Further, the for-profit prohibition conforms with contempo-

rary education funding as nearly half of states with charter

school laws either prohibit for-profit entities from applying

for a charter or prevent them from operating or managing a

charter school.

Additionally, the natural reading of the statutes appears

consistent with the report from the congressional committee

that produced the initial Charter School Expansion Act. In its

report, the House Committee on Education and the Workforce

noted “that there is nothing in the statute that prohibits charter

schools from contracting with for-profit companies to manage

the operations of a charter school. The Department currently

does not prohibit charter schools who contract out specific

services with for-profit organizations from receiving Federal

dollars.” H.R. Rep. No. 105-321, 1997 WL 638575, at *19

(1997). Recognition of this contract alternative evinces con-

gressional understanding that the “nonprofit” requirement

constrained the added term “including a public . . . charter

school.” If Congress believed that the “charter school”

amendment had rendered the nonprofit requirement moot (as

it applied to charter schools), then there was no need to

acknowledge this end-around: if for-profit charter schools

were eligible for funding, then it would not be noteworthy

that charters schools could also contract with for-profit com-

panies and still receive funding.

[5] Ultimately, the purpose of the “charter school” amend-

ments — to assist charter schools — is advanced, not contra-

ARIZONA STATE BOARD v. U.S. DEP’T OF EDUC. 11949

dicted, by the plain meaning of the statute as nonprofit charter

schools are assured appropriate funding. Because an interpre-

tation that prohibits funding to for-profit charter schools is not

only apparent from a natural reading of the text, but also con-

sistent with the legislative purpose and history of the statutes,

we hold that Arizona’s for-profit charter schools are excluded

from ESEA and IDEA funding.

C. Department Deference

Even if we held the statutory language to be ambiguous, we

would still reach the same result because the Department’s

interpretation is reasonable and entitled to deference. As the

Supreme Court noted in Chevron, “We have long recognized

that considerable weight should be accorded to an executive

department’s construction of a statutory scheme it is entrusted

to administer . . . .” Chevron, 467 U.S. at 844. We need not

decide, however, whether the Department’s interpretation is

entitled to Chevron deference, or the lesser Skidmore defer-

ence, because “the result in the present case would be the

same under any standard of deference.” Vigil, 381 F.3d at

835.

IV. Conclusion

Because the district court’s construction is consistent with

the plain meaning of the text, the legislative history, and the

Department’s reasonable interpretation, we affirm.

AFFIRMED.