Cape Fear Academy sexual harassment lawsuit: Judge upholds Title IX claims

Editor's note: All stories on the Cape Fear Academy lawsuit can be found here.

A judge has denied Cape Fear Academy’s motion to dismiss a lawsuit after it attempted to argue it is not subject to federal Title IX protections that forbid discrimination based on sex in education.

The private K-12 school is facing a lawsuit from three former female students and their families after it allegedly retaliated against them when they reported sexual harassment by fellow male students.

The female students argued that this violated their Title IX rights, a federal law that protects students from gender-based discrimination.

The school asked a judge to dismiss the lawsuit because it does not accept federal funding and is therefore not subject to Title IX.

But U.S. District Court Judge James C. Dever on Friday, denied this ask because the school accepted a loan through the Paycheck Protection Program, a part of the federal CARES Act during the COVID-19 pandemic in 2020.

Title IX typically applies to schools that accept federal funding.

Cape Fear Academy traditionally has not been subject to Title IX because it is funded by tuition dollars and donations.

However, the school accepted a federal loan through the Paycheck Protection Program, allowing the former students to file the lawsuit against the school for an alleged violation of the law.

The school argued that the loan was a guaranty and was not subject to Title IX, because the funding was coming from a private entity – First Carolina Bank – and the federal government was acting as a guarantor in the case the school defaulted on paying back the loan.

But Dever said the argument is invalid and the PPP loan is considered federal financial assistance in a decision released Friday. He added that the Paycheck Protection Program was referred to as a loan 75 times in the federal CARES Act, and First Carolina Bank is “the intermediary” in a measure passed by Congress to allow businesses to receive financial assistance during the pandemic.

“A borrower receiving a PPP loan receives federal financial assistance indirectly through an intermediary … under an arrangement created by Congress and is a recipient of federal financial assistance for the duration of the loan,” Dever wrote in the decision.

Students file lawsuit: Former Cape Fear Academy students claim retaliation after reporting sexual harassment

Motion to dismiss: Cape Fear Academy says lawsuit allegations are not 'extreme' enough to fall under Title IX

PPP and Title IX: Was Cape Fear Academy covered by Title IX? How PPP loans impacted independent schools

Additionally, the school argued that if it is subject to Title IX, the allegations in the lawsuit are not “severe, pervasive or objectively offensive” enough to fall under the federal law.

Dever negated this argument, saying the students’ allegations of sexual harassment are plausible and the school can be held liable because of Title IX.

Additionally, the judge ruled in favor of Cape Fear Academy on the plaintiffs’ allegations of intentional infliction of emotional distress and negligent infliction of emotional distress. Those two allegations were dismissed.

The students’ Title IX claim, as well as a breach of contract claim, will continue to trial.

Reporter Sydney Hoover can be reached at 910-343-2339 or shoover@gannett.com.

This article originally appeared on Wilmington StarNews: Judge denies Cape Fear Academy's motion to dismiss Title IX lawsuit