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Beauty Basics Inc. v. Texas Department of Licensing and Regulation

Court of Appeals of Texas, Third District, Austin

September 7, 2017

Beauty Basics Inc. d/b/a Aveda Institute-Dallas, Appellant
v.
Texas Department of Licensing and Regulation and Texas Commission of Licensing and Regulation, Appellees

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT NO. D-1-GN-15-003690, HONORABLE KAREN CRUMP, JUDGE PRESIDING

          Before Justices Puryear, Field, and Bourland.

          OPINION

          David Puryear, Justice.

         In this administrative appeal, Beauty Basics Inc. d/b/a Aveda Institute-Dallas (the Institute), a private beauty school, contests a decision of the Texas Commission of Licensing and Regulation assessing a $1, 500 administrative penalty against the school. See Tex. Occ. Code § 51.301 (granting Commission authority to impose administrative penalties for violations of laws established under regulatory program administered by Texas Department of Licensing and Regulation). The Commission assessed the penalty based on its determination that the Institute's tuition refund policy violated the Occupations Code by requiring students who withdraw prior to completing a cosmetology program to pay the remaining unpaid tuition. See id. §§ 1602.451, .452, .458, .459. For the following reasons, we affirm the judgment of the district court upholding the Commission's decision.

         BACKGROUND [1]

         The Legislature has entrusted the Texas Department of Licensing and Regulation (the Department) with the regulation of cosmetology and related occupations. See id.§ 1603.002. The Commission governs the Department. Id. § 51.051(b). The Institute is licensed by the Department as a "private beauty culture school." Id. § 1602.303. As a result, the Institute is bound by the requirements of sections 1602.451-.465 of the Occupations Code, which govern the operation of beauty schools. See id. §§ 1602.451-.465.

         In July 2010, a student signed an enrollment contract with the Institute to attend a 1, 500-hour course in cosmetology to run for fifty-two weeks within a period of twelve months. The tuition for the course was set at $19, 282.50. In April 2011, after completing 73.54% of the program, the Institute expelled the student, for reasons not relevant to this appeal. At the time of her expulsion, the student had paid tuition and fees equaling $15, 406.42. On the day it expelled the student, the Institute demanded $3, 976.08 for the remaining tuition and fees owed for the full-year program. The student paid the Institute[2]and then filed a complaint with the Department.

         The Department investigated the student's complaint and determined that the Institute's refund policy violated the Occupations Code by requiring students who withdraw early from the 1500-hour program to pay the full, unpaid tuition balance. Cf. id. § 1602.458(a) ("The holder of a private beauty culture school license shall maintain a refund policy to provide for the refund of any unused part of tuition, fees, and other charges paid by a student who . . . is terminated from the course of training before completion of the course."). The Institute's refund policy-which is printed in its enrollment contracts-provided:

For students who enroll in and begin classes, refunds are determined by a formula using a percentage of time enrolled plus a termination fee of $100 (see the schedule below). The percentage of time enrolled is calculated by dividing the number of actual hours enrolled by the total number of actual hours in the course. The following schedule of tuition adjustments is used:

Percentage of Time to Total Course Tuition

Amount of Tuition Owed to School

Less than 30 hours

10%

31-90 hours

20%

91 hours-25%

25%

25.1%-49.99%

50%

50.00% to 100.0%

100%

         The Department issued the Institute a Notice of Alleged Violation, which the Institute disputed.

         The Institute requested a hearing before an administrative law judge (ALJ) with the State Office of Administrative Hearings (SOAH), and in those proceedings the parties entered into a stipulation of the relevant facts of the case, narrowing the scope of the contested case to the statutory interpretation of the refund-policy requirements under the Occupations Code. After ruling in the Department's favor on the parties' cross-motions for summary disposition, the ALJ issued a proposal for decision (PFD) determining that the Institute's refund policy was in violation of the Occupations Code and recommending that a penalty of $4, 250 be assessed. The Commission initially adopted the PFD without modification but, upon rehearing, issued a final order adopting the PFD in its entirety except to reduce the administrative penalty from $4, 250 to $1, 500 because it "believe[d] a lower penalty is more appropriate in light of all the facts and circumstances."

         The Institute filed a suit for judicial review challenging the Commission's order, and the district court affirmed the Commission's decision. The Institute appeals, contending that the Commission and the trial court misinterpreted sections 1602.458 and 1602.459 of the Occupations Code in concluding that (a) the Institute may not recover unpaid tuition from a student whose enrollment is terminated after completing more than 50% but less than 100% of the school's program and (b) the Institute published a refund policy that did not comply with the Occupations Code.

         DISCUSSION

         Because the sole issue in this case is one of statutory construction, we review the Commission's legal determinations de novo.[3] See Nobles v. Employees Ret. Sys. of Tex., 53 S.W.3d 483, 490 (Tex. App.-Austin 2001, no pet.). Two statutes set out the requirements of a beauty school's refund policy and, at the relevant time period, provided:

(a) The holder of a private beauty culture school license shall maintain a refund policy to provide for the refund of any unused part of tuition, fees, and other charges paid by a student who, at the expiration of the ...

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