In a lawsuit filed this week in U.S. District Court in Arizona, the university alleges the Department of Education acted without justification, reflecting “disparate treatment of GCU,” when it rejected a nonprofit conversion bid and continued to classify Grand Canyon as a for-profit institution.
The university also argues the department has impeded GCU’s “constitutionally-protected right to call itself a nonprofit institution, in violation of the First Amendment.”
GCU’s nonprofit status is recognized by the Internal Revenue Service, the Higher Learning Commission and the state of Arizona. But the U.S. Department of Education published an 18-page letter laying out reasoning for rejecting Grand Canyon’s nonprofit bid in November 2019. That letter focused on the fact that Grand Canyon University is still closely related to the publicly traded for-profit company that used to own it. For example, the president of Grand Canyon University, Brian Mueller, is also the for-profit company’s chief executive officer.
That 2019 decision prompted Grand Canyon to make changes to try to win department approval. It was unsuccessful and signaled last month that this week’s lawsuit would be forthcoming.
“The Department’s primary stated basis for denying GCU’s nonprofit status was GCU’s relationship with a company that provides services in exchange for a percentage of GCU’s revenue. But the Department has approved other nonprofit institutions that use materially similar arrangements,” the lawsuit says.
The U.S. Department of Education’s regulations “expressly allow these relationships, which are common among institutions of higher education,” the lawsuit says. “In fact, some nonprofits pay as much as 80 percent of their revenue under such arrangements. GCU pays far less under its service agreement.”
A spokesperson for the U.S. Department of Education told The Arizona Republic that the department does not comment on pending litigation. The department had yet to file a response to the lawsuit Wednesday.