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AMERICAN BANKERS ASSN. v. BENNETT

September 16, 1985

AMERICAN BANKERS ASSOCIATION, Plaintiff,
v.
WILLIAM J. BENNETT, Secretary of the United States Department of Education, Defendant


Harris


The opinion of the court was delivered by: HARRIS

Before the Court now are defendant's motions for judgment on the pleadings and for summary judgment and plaintiff's motion for summary judgment. The Court has considered the motions, the oppositions thereto, the replies, and the other pleadings and the affidavits filed herein and is of the opinion that no genuine issue of material fact exists. The Court concludes that the plaintiff is entitled to summary judgment in its favor, to a permanent injunction enjoining the defendant Secretary of Education (hereinafter Education) from withholding payments due to commercial banks under the Guaranteed Student Loan Program, and to a declaration that the practice of so withholding is unlawful under the factual situation presented by this case.

 I. Background of the Controversy

 The plaintiff, American Bankers Association (ABA), is a trade association for the commercial banking industry and appears here in a representative capacity on behalf of its some 12,688 commercial bank members. The ABA challenges the legality of deductions made by Education, at the behest of the Department of the Treasury (hereinafter Treasury), from payments otherwise due member banks of the ABA under the Guaranteed Student Loan Program. The deductions are in the amounts allegedly owed by those banks to Treasury because of payments made on forged or altered Treasury checks. Education contends that the deductions are authorized by the Debt Collection Act of 1982, 31 U.S.C. § 3716, and regulations issued thereunder.

 Under the Debt Collection Act (DCA), the head of an agency is directed to "try to collect a claim of the United States Government for money or property arising out of the activities of, or referred to, the agency." 31 U.S.C. § 3711. The head of an agency may collect a debt subject to the DCA by administrative offset after giving the debtor various procedural rights such as written notice and an opportunity for inspection and review. 31 U.S.C. § 3716(a)(1)-(4). In accordance with the DCA, Treasury issued regulations which deal specifically with offsets against banks arising from the payment of Treasury checks bearing forged or unauthorized endorsements. 31 C.F.R. Part 240 (1984). These regulations were adopted after public rulemaking proceedings in which the ABA participated. The regulations provide that if Treasury is unable otherwise to recover money paid to the bank in satisfaction of a check paid over a forged or unauthorized endorsement, the matter may be referred to another federal agency with a request that that agency offset the indebtedness against amounts already owed by the other federal agency to the presenting bank. 31 C.F.R. § 240.7. Such requests have been made and honored as to approximately 54 banks by Education.

 The funds withheld from the banks were payments owed them by Education under the Guaranteed Student Loan Program. 20 U.S.C. §§ 1078 et seq. Under that program, the Government makes mandatory payments of interest and special allowances to banks holding student loans. 20 U.S.C. §§ 1078(a)(3)(A), 1087-1(b). In reliance upon the provisions of the Higher Education Act (HEA) of 1965, 20 U.S.C. § 1001 et seq., many ABA member banks have extended loans to students. The banks are approved as eligible lenders by Education and duly submit requests for payments of interest benefits and special allowances. Because Education has honored Treasury's requests for offsets, the full amounts requested by the banks have not always been paid.

 II. Preliminary Issues

 The defendant has challenged the plaintiff's standing to bring this action. In addition, Education argues that the relief sought is barred by sovereign immunity. The Court concludes that the plaintiff has standing and that the doctrine of sovereign immunity does not apply.

 A. Standing

 In challenging the ABA's standing, Education characterizes the relief sought as the equivalent of an award of money damages against the United States. Education argues that because the relief sought could require the payment of money from the Government to various banks for improper offsets, it is a claim for money damages with respect to which the ABA lacks standing. Where "the damage claims are not common to the entire membership, nor shared by all in equal degree" and where "whatever injury may have been suffered is peculiar to the individual member concerned, and both the fact and extent of injury would require individualized proof," associations generally lack standing. Warth v. Seldin, 422 U.S. 490, 515-16, 95 S. Ct. 2197, 2213-14, 45 L. Ed. 2d 343 (1975). The nature of the claims in this case, argues Education, requires the individual participation of the affected member banks.

 The Court finds that argument unpersuasive. First, a mandamus claim, as here, is not transformed into a suit for damages merely because the writ could require the expenditure of money through a ministerial act. Starnes v. Schweiker, 715 F.2d 134, 142 (4th Cir. 1983); National Treasury Employees Union v. Nixon, 160 U.S. App. D.C. 321, 492 F.2d 587 (D.C. Cir. 1974). The obligation to pay interest subsidies and special allowances is ministerial in that it is nondiscretionary, clearly defined, and indisputable under the Higher Education Act. Second, the amounts of money owed under the HEA are known and undisputed and, therefore, Education readily was able to offset the amount allegedly due Treasury. It is the amounts due the Treasury that are disputed and subject to individualized proof and defenses. Those amounts are not material to the question at hand and do not affect the plaintiff's standing to challenge the Government's interpretation of the HEA and the DCA. Finally, the ABA has standing to sue on behalf of its members because it has alleged (1) that the banks have suffered injury in fact from Education's action, and (2) that such injury is within a zone of interests protected and regulated by the HEA. See Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970). The complaint states that certain member banks are entitled to interest subsidies and special allowances which have been withheld by Education. Those banks, as eligible lenders, "have a contractual right, as against the United States" to receive determined interest and special allowances. 20 U.S.C. §§ 1078(a)(3)(A), 1087-1(b)(3). It is only reasonable to believe that any remedy, if granted, will inure to the benefit of those members of the association actually injured by the offsets. See Warth v. Seldin, 422 U.S. at 515, 95 S. Ct. at 2213-14 (1975).

 B. Sovereign Immunity

 The doctrine of sovereign immunity which has been raised by Education has no applicability to this case. The Secretary of Education is subject to suit under the HEA. 20 U.S.C. § 1082(a)(2). The Administrative Procedure Act allows suit for other than relief in monetary damages. 5 U.S.C. § 702; National Treasury Employees Union v. Campbell, 191 U.S. App. D.C. 146, 589 F.2d 669, 673 n.7 (D.C. Cir. 1978). Where restitution is a logical adjunct to other primary equitable relief, it is available in the absence of a waiver of sovereign immunity. Griffin v. Harris, 480 F. Supp. 1072 (E.D. Pa. 1979). Finally, even if the doctrine applied, Congress, through the HEA, has appropriated funds for a specified purpose and directed Education to expend those funds in the manner set forth in the statute. Where Education has failed to expend those funds as directed, it has acted in excess of its statutory ...


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