So unfortunately, I received this reply from our support staff...
"In this case, the LMS does not see a Fail Status as a Terminal Status within their rules. Thus the course remains on the To-Do list until either the learner is able to complete the content or the LMS Administrator removes the content from their To-Do list by changing the user's status to Fail. I know this doesn't make any sense, but unfortunately that's the workflow that our LMS vendor has decided is the appropriate route. Also,
the LMS doesn't recognize the Pass/Fail or Complete/Incomplete status as one which will reflect that the learner has not successfully passed the requirements within the course. Ultimately Mzinga does not follow normal logic and implement a "Pass-Fail" or "Completed-Incomplete" status to reflect these instances where SCORM rules would apply."