MEMORANDUM OPINION AND ORDER
PAUL
L. FRIEDMAN, UNITED STATES DISTRICT JUDGE.
This
matter comes before the Court on defendants' motion [Dkt.
No. 14] to dismiss plaintiff's complaint. Plaintiff has
filed a memorandum [Dkt. No. 16] in opposition to the motion
to dismiss, and defendants have filed a reply [Dkt. No. 17]
in support of their motion. Having reviewed the complaint,
the parties' briefs, and the entire record in this case,
the Court will deny defendants' motion without prejudice.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff
Student Loan Servicing Alliance (“SLSA”) is a
trade organization whose membership is comprised of student
loan servicers and affiliates. See Compl. at ¶
9. In this case, SLSA challenges the lawfulness of District
of Columbia Law 21-214, as well as the emergency rules
promulgated under that statute, which aim to regulate the
student loan servicing industry. See id. at
¶¶ 6-8. SLSA asserts associational standing by
virtue of the alleged harms caused to its members by D.C. Law
21-214 and its implementing regulations. See id. at
¶¶ 13-16. SLSA brought its lawsuit against three
defendants: Stephen C. Taylor, in his official capacity as
Commissioner of the D.C. Department of Insurance, Securities
and Banking; Charles A. Burt, in his official capacity as
Student Loan and Foreclosure Ombudsman; and the District of
Columbia itself. See id. at ¶¶ 10-12;
see also Opp'n at 33-34.
Signed
into law on December 7, 2016, D.C. Law 21-214 went into
effect on February 18, 2017. See Compl. Ex. B.
Formally titled the “Student Loan Ombudsman
Establishment and Servicing Regulation Amendment Act of 2016,
” D.C. Law 21-214 provides for the development of a
licensing and regulatory regime to govern student loan
servicers operating in the District of Columbia. In
furtherance of this statutory goal, the law also creates a
Student Loan Ombudsman position within the Department of
Insurance, Securities and Banking (“DISB”). Under
D.C. Law 21-214, the DISB Ombudsman is tasked with enforcing
the licensing provisions of the law, conducting examinations
of student loan servicers and collecting examination fees,
and receiving and responding to complaints submitted by
borrowers, among other things.
On
September 8, 2017, the DISB Commissioner adopted a Notice of
Emergency and Proposed Rulemaking (“First
Notice”) under the regulatory authority conferred by
D.C. Law 21-214 and delegated to him by the Mayor.
See Compl. Ex. C at 2; Compl. Ex. O. This First
Notice not only began the rulemaking process, but also
implemented emergency interim regulations which immediately
went into effect. See Compl. Ex. C at 2. By its own
terms, the First Notice explained that the “emergency
rulemaking [was] necessary because the District must continue
to act swiftly to ensure the long-term financial safety and
security of District residents with student educational
loans” and provide continuity in the face of regulatory
uncertainty at the federal level. See id. at 1. In
response to the First Notice, DISB received four comments,
including a comment submitted by SLSA. See Compl.
Ex. H at 2; Compl. at ¶ 94.
On
December 26, 2017, and prior to the expiration of the First
Notice, DISB promulgated a Notice of Second Emergency and
Proposed Rulemaking (“Second Notice”).
See Compl. Ex. H at 2. The Second Notice similarly
initiated a comment period, while becoming immediately
effective in the interim. See id. The Second Notice
largely mirrored the First Notice, with one notable
exception: DISB changed the formula for calculating the
annual assessment fee from “$800 $6.60 per
loan” to “$0.50 per borrower residing in the
District of Columbia serviced by a servicer.”
See Opp'n Ex. 1 at 16; see also Compl.
Ex. C at 15; Compl. Ex. H at 16. The Second Notice received
one comment - submitted by SLSA - before the comment period
closed on February 26, 2018. See Mot. Ex. B at 2;
Opp'n at 3.
SLSA
filed its complaint in this case on March 20, 2018,
challenging D.C. Law 21-214 and the then-operative Second
Notice. Specifically, the complaint alleges that the D.C. law
and regulations are preempted by federal law on the basis of
three recognized theories: express preemption, field
preemption, and conflict preemption. See Compl. at
¶¶ 123-93. The complaint also alleges that the
regulations conflict with the plain language of D.C. Law
21-214, in violation of the District of Columbia
Administrative Procedure Act. See id. at
¶¶ 194-208.[1]
On
April 20, 2018, DISB promulgated a Third Notice of Emergency
and Proposed Rulemaking (“Third Notice”).
See Mot. Ex. B at 2. Upon its promulgation, the
Third Notice superseded the Second Notice, going into
immediate effect while also commencing an additional comment
period. See id. This Third Notice is currently
operative, although it expires on August 18, 2018. See
id. The provisions of the Third Notice are substantially
similar to those of the Second Notice, although the Third
Notice makes a handful of changes. Notably, the Third Notice
includes a savings clause that makes record keeping
requirements applicable only to the extent allowed by federal
law, as well as new language conferring discretion on the
Commissioner to “waive or reduce [record keeping]
requirements . . . if . . . compliance would require the
licensee to violate federal law.” See
Opp'n Ex. 2 at 13. The Third Notice also contains
provisions expanding the discretion of the Commissioner with
regard to examinations and investigations of student loan
servicers. See id. at 15. In addition, in
promulgating the Third Notice, DISB extended the deadline for
the annual assessment of fees for a licensee from November 1
to November 15, 2018, see id. at 12, and reduced the
maximum late penalty for filing an annual report from $1, 000
per day to $50 per day, see id. at 10, 17.
II.
ANALYSIS OF THE INSTANT MOTION
Defendants
filed their motion to dismiss the complaint shortly after
DISB promulgated its Third Notice implementing a new set of
regulations. In their motion, defendants argue that
SLSA's claims are moot because the complaint challenges
the Second Notice, now superseded by the Third Notice, and
the Second Notice is no longer in effect. See Mot.
at 9-10. Defendants also move to dismiss the complaint on
grounds of justiciability (arguing that SLSA's preemption
claims are not ripe and that SLSA lacks standing) and for
failure to state a claim upon which relief can be granted
(arguing the legal merits of SLSA's preemption claims, as
well as the merits of SLSA's D.C. Administrative
Procedure Act claim). See id. at 10-32. With a few
exceptions, defendants' memorandum in support of its
motion largely addresses the merits as they pertain to the
Third Notice.
Instead
of seeking leave to amend its complaint, which was based
entirely on the Second Notice, SLSA responded to
defendants' motion by filing a memorandum in opposition,
asserting that “[t]he Third Emergency Rules differ in
only minor respects from the superseded Second Emergency
Rules” and proceeding to argue the merits of the motion
to dismiss with respect to the Third Notice. See
Opp'n at 8. In its opposition, SLSA also argues that
deeming the complaint moot would promote gamesmanship:
[N]othing prevents Defendants from promulgating further
emergency rules or even adopting the language from the First
Emergency Rules or Second Emergency Rules in further
iterations of emergency rules ad infinitum or as a final
rule. If Defendants could moot the claims in this case
challenging the Emergency Rules each time they adopt new
ones, Defendants could effectively prevent ...