Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Bauer v. DeVos

United States District Court, District of Columbia

September 12, 2018

MEAGHAN BAUER, et al., Plaintiffs,
ELISABETH DeVOS, Secretary, U.S. Department of Education, et al., Defendants.



         Meaghan Bauer, Stephano Del Rose, and a coalition of nineteen states and the District of Columbia bring suit against the Department of Education under the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq. Plaintiffs challenge three agency actions delaying the implementation of the “Borrower Defense Regulations, ” a package of regulatory changes to federal student loan programs designed to “protect student loan borrowers from misleading, deceitful, and predatory practices.” William D. Ford Federal Direct Loan Program (“Borrower Defense Regulations”), 81 Fed. Reg. 75, 926, 75, 926 (Nov. 1, 2016). The Borrower Defense Regulations were published on November 1, 2016, and were to become effective on July 1, 2017. Shortly before the effective date, however, the California Association of Private Postsecondary Schools (“CAPPS”), brought suit challenging the regulations, and, a week later, CAPPS sought a preliminary injunction blocking the implementation of two changes. That motion was never fully briefed or decided because the Department, on its own accord, issued a stay under § 705 of the APA (“Section 705 Stay”), postponing not only the effective date of the two changes that CAPPS had asked the Court preliminarily to enjoin, but most of the other portions of the regulations as well. While the CAPPS litigation continued, the Department issued an interim final rule on October 24, 2017 that delayed the effective date of the Borrower Defense Regulations to July 1, 2018, and a notice of proposed rulemaking to further delay the effective date to July 1, 2019. Then, on February 14, 2018, the Department issued a final rule delaying the effective date of the Borrower Defense Regulations until July 1, 2019.

         Within weeks of the issuance of the Section 705 Stay, Bauer and Del Rose (student borrowers who allege that they would benefit from the Borrower Defense Regulations) and the coalition of nineteen states and the District of Columbia filed separate suits seeking to invalidate the stay. Over the course of the last year, both sets of plaintiffs have amended their complaints to challenge the additional delay actions taken in October 2017 and February 2018. On March 1, 2018, the Court consolidated the student borrower and state cases, stayed the CAPPS case pending resolution of this case, and ordered a final round of summary judgment briefing.

         The matter is now before the Court on cross-motions for summary judgment filed by the state plaintiffs, Dkt. 55, the student borrower plaintiffs, Dkt. 56, and the Department, Dkt. 58; Dkt. 59. In brief, the Court concludes that Plaintiffs have standing to challenge the delay actions; that the October 24, 2017 Interim Final Rule is based on an unlawful construction of the Higher Education Act of 1965; that the February 14, 2018 Final Delay Rule is procedurally invalid; that the Section 705 Stay is judicially reviewable; and that the Department's Section 705 Stay is arbitrary and capricious. The Court, accordingly, will GRANT the state plaintiffs' and the student borrower plaintiffs' motions for summary judgment, Dkt. 55; Dkt. 56, and will DENY the Department's cross-motion, Dkt. 66. Before entering a remedial decree, the Court will order the parties in this case and the parties and proposed intervenors in CAPPS v. DeVos, Civil Action No. 17-999, to appear for a status conference on September 14, 2018, at 10:30 a.m. in Courtroom 21.

         I. BACKGROUND

         A. Borrower Defense Regulations

         Title IV of the Higher Education Act of 1965 (“HEA”), 20 U.S.C. § 1070 et seq., empowers the Secretary of Education “to assist in making available the benefits of postsecondary education to eligible students . . . in institutions of higher education” through various types of financial aid. Id. § 1070(a). The William D. Ford Federal Direct Loan Program (“Direct Loan Program”) allows students who attend “participating institutions of higher education” to obtain direct loans from the federal government to pay for their educational expenses. Id. § 1087a(a). Those institutions of higher education that are selected to participate in the Direct Loan Program must enter into an agreement with the Secretary of Education, which may include any provisions “the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of” the Direct Loan Program. Id. § 1087d(a)(6); see also Id. § 1087c. Moreover, and more generally, the Secretary has authority “to make, promulgate, issue, rescind, and amend rules and regulations governing the” Direct Loan Program. Id. § 1221e-3. In administering the Direct Loan Program, the Secretary must also “specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan” made under the Direct Loan Program. Id. § 1087e(h).

         Pursuant to these authorities, in January 1994, the Secretary issued “standards, criteria, and procedures governing the Federal Direct Student Loan . . . program.” Federal Direct Student Loan Program, 59 Fed. Reg. 472, 472 (Jan. 4, 1994). Those standards included the first iteration of the borrower defense rule, which permitted a Direct Loan Program borrower to “assert as a defense against the repayment of the loan a claim based on the act or omission of the school” if (1) that act or omission gave rise to a cause of action against the school under state law, (2) the borrower presented the “claim to the school and received no satisfaction, ” and (3) the borrower filed a timely claim with the Department of Education. Id. at 481.

         In December 1994, the Secretary amended the Direct Loan Program regulations, including those governing borrower defenses. See William D. Ford Federal Direct Loan Program, 59 Fed. Reg. 61, 664, 61, 696 (Dec. 1, 1994). Under the new regulations-which remain in effect today-borrowers are permitted to assert “as a defense against repayment, any act or omission of the school attended by the [borrower] that would give rise to a cause of action against the school under applicable State law.” 34 C.F.R. § 685.206(c)(1) (2016). If that defense to “repayment is successful, the Secretary notifies the borrower that the borrower is relieved of the obligation to repay all or part of the loan, ” and the Secretary may provide the borrower with further relief as appropriate. Id. § 685.206(c)(2). The Secretary may then bring a “proceeding to require the school whose act or omission resulted in the borrower's successful defense against repayment of [the] Direct Loan to pay to the Secretary the amount of the loan to which the defense applies.” Id. § 685.206(c)(3). In short, the 1994 borrower defense rule permits a student borrower to assert his or her school's misconduct as a reason for nonrepayment, and, if successful, the regulation shifts the obligation to repay the loan from the borrower to the school.

         The adequacy of the 1994 borrower defense rule was tested by “the collapse of Corinthian Colleges (Corinthian)” in May 2015. William D. Ford Federal Direct Loan Program (“June 16, 2016 Notice of Proposed Rulemaking (‘NPRM')”), 81 Fed. Reg. 39, 330, 39, 330 (June 16, 2016). Corinthian was “a publicly traded company [that] operat[ed] numerous postsecondary schools that enrolled over 70, 000 students at more than 100 campuses nationwide.” Id. at 39, 335. After Corinthian “filed for bankruptcy” and the Department found “that the college had misrepresented its job placement rates, ” the Department “received thousands of claims for student loan relief from Corinthian students.” Id. In dealing with the aftermath, the Department concluded that the 1994 borrower defense rule was outdated and was no longer adequate to deal with the changed “landscape of higher education.” Id.

         To address these perceived deficiencies, the Department commenced a rulemaking. First, pursuant to its obligations under the HEA, it “obtain[ed] the advice of and recommendations from individuals and representatives of the groups involved in student financial assistance programs under [Title IV of the HEA], such as students, legal assistance organizations that represent students, institutions of higher education, State student grant agencies, guaranty agencies, lenders, secondary markets, loan servicers, guaranty agency servicers, and collection agencies.” 20 U.S.C. § 1098a(a)(1). After obtaining those recommendations, the Department published a notice of intent to engage in negotiated rulemaking regarding borrower defenses and a request for public comment on August 20, 2015.[1] Negotiated Rulemaking Committee, Public Hearings, 80 Fed. Reg. 50, 588 (Aug. 20, 2015). The Department selected a committee, but after a series of meetings in early 2016, the negotiators were unable to reach consensus. June 16, 2016 NPRM, 81 Fed. Reg. at 39, 333-34. As a result, the Department issued its own notice of proposed rulemaking on June 16, 2016, and invited the members of the negotiating committee, in addition to members of the public, to submit comments on a set of regulations crafted by the Department in light of the negotiations and earlier public hearings. Id. More than 50, 000 parties submitted comments in response to the Department's notice of proposed rulemaking. Borrower Defense Regulations, 81 Fed. Reg. at 75, 928.

         On November 1, 2016, the Department published the final regulations governing the Direct Loan Program. See Id. at 75, 926. In relevant part, the Borrower Defense Regulations: (1) revised the procedures for student borrowers seeking to discharge their federal loans as a result of school misconduct; (2) revised the processes for students seeking other forms of debt relief; (3) required “financially risky institutions [to be] prepared to take responsibility for the losses to the government for discharges of and repayments for [f]ederal student loans;” (4) expanded the disclosure obligations of institutions “at which the median borrower has not repaid in full, or made loan payments sufficient to reduce by at the least one dollar the outstanding balance of the borrower's loans received at the institution;” (5) altered the standard for students asserting a “borrower defense” to collection actions; (6) expanded the situations in which the Department could proactively forgive loans in groups, rather than upon individual applications; and (7) prohibited schools “participating in the Direct Loan Program from obtaining” or relying upon a borrower's “waive[r] [of] his or her right to initiate or participate in a class action lawsuit, ” or “from requiring students to engage in internal dispute processes before contacting accrediting or government agencies.” Id. at 75, 926-27.

         The Borrower Defense Regulations were set to take effect eight months later, on July 1, 2017.

         B. California Association of Private Postsecondary Schools Litigation

         The California Association of Private Postsecondary Schools is an industry group that represents schools subject to provisions of the Borrower Defense Regulations. CAPPS filed suit in this Court on May 24, 2017, alleging that four aspects of the regulations were unlawful. See Dkt. 1 at 69-75 (Compl. ¶¶ 202-41), CAPPS v. DeVos, Civ. No. 17-999 (D.D.C.). In particular, CAPPS challenged (1) changes to the procedures and options available to students seeking debt relief; (2) modifications of certain financial responsibility standards; (3) requirements that proprietary schools disclose additional information about loan repayment rates to students and prospective students; and (4) prohibitions on the inclusion of or reliance on arbitration and class action waiver provisions in contracts with students. Id. CAPPS sought to enjoin the Department “from implementing, applying, or taking any action whatsoever pursuant to the final regulations, ” and to vacate the entirety of the final rule. Dkt. 1 at 75 (Compl. ¶ 242), CAPPS, Civ. No. 17-1999.

         On June 2, 2017, CAPPS filed a motion for preliminary injunction. Dkt. 6, CAPPS, Civ. No. 17-999. The relief sought in that motion, however, was more limited than that sought in the complaint; CAPPS sought preliminarily to enjoin only the provision of the Borrower Defense Regulations prohibiting predispute arbitration clauses and class action waivers. Id. at 1. The Court set a briefing schedule, ordering the Department to file its opposition on or before June 15, 2017. Minute Entry (June 6, 2017), CAPPS, Civ. No. 17-999. On June 13, 2017, the same states that are plaintiffs in the present action moved to intervene as defendants in the CAPPS case and were soon followed by Bauer and Del Rose. Dkt. 16, Dkt. 22, Dkt. 31, CAPPS, Civ. No. 17-999. The day before the Department's opposition to CAPPS's motion was due, the Department notified the Court that it was in the process of staying the implementation of the entirety of the Borrower Defense Regulations under § 705 of the APA.[2] Dkt. 20, CAPPS, Civ. No. 17-999. At that point, CAPPS withdrew its motion for a preliminary injunction, Dkt. 21, CAPPS, Civ. No. 17-999, and, on September 6, 2017, the Department filed an answer, Dkt. 52, CAPPS, Civ. No. 17-999. Neither party took any step thereafter to advance the CAPPS litigation.

         C. Present Action

         On July 6, 2017, shortly after the Department issued its Section 705 Stay, Plaintiffs Meaghan Bauer and Stephano Del Rose filed the present action. Dkt. 1. Bauer and Del Rose attended New England Institute of Art (“NEIA”), a for-profit college. Dkt. 53 at 10 (Compl. ¶ 35).[3] Bauer attended a filmmaking program from 2011 to 2014. Id. Del Rose attended the same program from 2009 to 2014. Id. Each borrowed more than $30, 000 in federal direct loans to finance his or her attendance. Id. (Compl. ¶¶ 36-37). Each now owes more than $40, 000 to the Department. Id. Bauer and Del Rose both seek loan forgiveness as a result of “NEIA's fraud and other related misconduct, ” Id. at 12 (Compl. ¶ 45); they also wish to bring a class action on behalf of students at NEIA, Id. at 11 (Compl. ¶ 40). As such, they allege that the continued delay in implementing the Borrower Defense Regulations has impaired their ability to vindicate their rights against NEIA and to obtain related relief. Id. at 12-17 (Compl. ¶¶ 44-62).

         The state plaintiffs include nineteen states and the District of Columbia. Dkt. 80 at 1-2 (Compl.), Massachusetts v. DeVos, Civ. No. 17-1331 (D.D.C.).[4] The states allege that they “initiate numerous investigations and enforcement actions against proprietary and for-profit schools for violations of the States' consumer protection statutes, ” Id. at 15 (Compl. ¶ 61), and that the Borrower Defense Regulations “afford[] a legally significant status to enforcement actions and investigations undertaken by state attorneys general, ” Id. at 22 (Compl. ¶ 77). Specifically, under the rule, “[a] successful enforcement action brought against a postsecondary institution by a state attorney general gives rise to a borrower defense to loan repayment, ” and “a state agency's issuance of a civil investigative demand against a school whose conduct resulted in a borrower defense will qualify as notice permitting the Secretary of Education to seek repayment from the school for any amounts forgiven.” Id. The state plaintiffs argue that, “[b]y incorporating state enforcement actions and investigations into the Department's borrower defense framework, the Borrower Defense [Regulations] enhance the effectiveness of state enforcement efforts and the remedies available for violations of state law.” Id. (Compl. ¶ 78). The states, moreover, argue that the Borrower Defense Regulations protect “the economic health and well-being of state residents and . . . the quality of higher education within each state.” Dkt. 64 at 23.

         Although the state and student borrower plaintiffs initially challenged only the Section 705 Stay, over the course of the last year, they have amended their complaints to encompass challenges to additional agency actions delaying the effective date of the Borrower Defense Regulations. See Dkt. 25; Dkt. 53; see also Dkt. 46, Dkt. 80, Massachusetts v. DeVos, Civ. No. 17-1331. The Court discusses each of those agency actions in turn.

         1. Section 705 Stay and Notice of Negotiated Rulemaking to Revise Borrower Defense Regulations

         On June 16, 2017, the Department published a notice in the Federal Register delaying the effective date of the Borrower Defense Regulations “until the judicial challenges to the regulations are resolved.”[5] William D. Ford Federal Direct Loan Program (“Section 705 Stay”), 82 Fed. Reg. 27, 621, 27, 621 (June 16, 2017). The Department premised that decision on § 705 of the APA, which authorizes an agency to “postpone the effective date of action taken by it, pending judicial review, ” if the “agency finds that justice so requires.” 5 U.S.C. § 705. In the view of the Department, this standard was satisfied “[i]n light of the existence and potential consequences of the pending [CAPPS] litigation.” Section 705 Stay, 82 Fed. Reg. at 27, 621.

         The Department identified three factors in support of its conclusion that a delay was justified under § 705. First, it found value in “preserv[ing] the regulatory status quo, ” because the CAPPS “plaintiffs ha[d] raised serious questions concerning the validity of certain provisions of the final regulations and ha[d] identified substantial injuries that could result if the final regulations [went] into effect before those questions [were] resolved.” Id. Specifically, the Department pointed to the cost to institutions of “modify[ing] their contracts in accordance with the arbitration and class action waiver regulations, which may be contrary to their interests” and complying with the regulations' financial responsibility provisions. Id. On the other side of the balance, the Department found that the delay would cause little harm to student borrowers because they could still obtain relief from the Department under the 1994 borrower defense rule, which would “remain in effect during the postponement.” Id.

         Second, the Department concluded that postponing the effective date of the Borrower Defense Regulations would cause “no significant harm” to the United States. Id. Rather, by delaying the implementation of provisions designed to make the discharge of federal student loans easier, the United States would stand to avoid “significant costs to the Federal government and ultimately the Federal taxpayer.” Id. at 27, 621-22 (“The final regulations were estimated to have a net budget impact in costs over the 2016-2026 loan cohorts of $16.6 billion in the primary estimate scenario, including a cost of $381 million for cohorts 2014-2016 attributable to the regulations providing for a three-year automatic closed school discharge.”).

         Finally, the Department stated, “[s]eparately, ” that it would be “announcing its plan to review and revise the regulations through the negotiated rulemaking process required under section 492 of the HEA.” Id. at 27, 622. Those potential revisions were relevant to the Section 705 Stay, because “[t]he postponement will allow the Department to consider and conduct a rulemaking process to review and revise the final regulations and ensures regulated parties will not incur costs that could be eliminated under any future regulations the Department promulgates on these matters.” Id.

         That same day, the Department published notice of its intent to establish a negotiated rulemaking committee to revise the Borrower Defense Regulations. Negotiated Rulemaking Committee; Public Hearings (“June 16, 2017 Notice of Intent”), 82 Fed. Reg. 27, 640 (June 16, 2017).

         2. October 24, 2017 Interim Final Rule and Notice of Proposed Rulemaking for Final Delay Rule

         The next agency actions relevant to the pending motions occurred four months later, on October 24, 2017, when the Department published two documents. The first was an interim final rule delaying the effective date of the Borrower Defense Regulations until July 1, 2018, even if the Section 705 Stay was lifted before then.[6] William D. Ford Federal Direct Loan Program (“Interim Final Rule”), 82 Fed. Reg. 49, 114 (Oct. 24, 2017). Invoking the good cause provisions of §§ 553(b)(3)(B) and (d)(3) of the APA, the Department issued the Interim Final Rule without advance notice or the opportunity for comment. Id. at 49, 114; see also 5 U.S.C. § 553(b)(3)(B) (providing an exception to the notice and comment requirement when those procedures are “impracticable, unnecessary, or contrary to the public interest”); 5 U.S.C. § 553(d)(3) (providing an exception to the “required publication or service of a substantive rule . . . 30 days before its effective date” upon a finding of good cause “published with the rule”). Even though the Interim Final Rule took effect immediately, the Department nevertheless invited comments for a thirty-day period. See 82 Fed. Reg. at 49, 115.

         The Department premised the Interim Final Rule on the “Master Calendar Provision” of the HEA, 20 U.S.C. § 1089(c)(1). See Interim Final Rule, 82 Fed. Reg. at 49, 115-16. That provision states that, except in cases of voluntary compliance, “any regulatory changes initiated by the Secretary affecting the programs under [Title IV of the HEA] that have not been published in final form by November 1 prior to the start of the award year shall not become effective until the beginning of the second award year after such November 1 date.” 20 U.S.C. § 1089(c)(1). An award year begins on July 1. Interim Final Rule, 82 Fed. Reg. at 49, 115. A “regulatory change, ” accordingly, would have to be “published in final form on or before” November 1, 2017, to become effective by July 1, 2018. Id. at 49, 115-16.

         The Department, however, did not simply rely on this November-July interval to justify the Interim Final Rule. Instead, it interpreted the Master Calendar Provision further to require that all “regulations promulgated under Title IV of the HEA have an effective date of July 1” so that institutions could “avoid incurring the costs of compliance on a rolling basis throughout the year.” Id. at 49, 116. In other words, under the Department's reading, the Master Calendar Provision allows applicable rules to take effect on only one day every year-July 1. Applied to the present circumstances, the Department posited that as soon as the Section 705 Stay delayed the effective date of the Borrower Defense Regulations beyond July 1, 2017, it lacked discretion to implement the regulations before July 1, 2018, even if the Section 705 Stay was lifted before that date. Id. The Department also relied on this reasoning to justify why it had good cause to forgo notice-and-comment and negotiated rulemaking; the Department concluded that because “it was impracticable” to do so between the initiation of the CAPPS litigation on May 24, 2017 and the July 1, 2017 effective date of the Borrower Defense Regulations, it “did not have any discretion to set an effective date earlier than July 1, 2018.” Id.

         On October 24, 2017, the Department also issued a notice of proposed rulemaking to further delay the effective date of the Borrower Defense Regulations to July 1, 2019.[7] William D. Ford Federal Direct Loan Program (“October 24, 2017 NPRM”), 82 Fed. Reg. 49, 155 (Oct. 24, 2017). The Department justified this delay on two grounds. First, it asserted that delaying the effective date would “ensure that there is adequate time to conduct [a] negotiated rulemaking” to reconsider the Borrower Defense Regulations. Id. at 49, 155. Second, it explained that, under the Master Calendar Provision, “the regulations resulting from [the] negotiated rulemaking could not be effective before July 1, 2019, ” because “the first negotiated rulemaking session” was not scheduled to take place until November 13-15, 2017. Id. at 49, 156.

         Although the Department provided notice and an opportunity for comment on the proposed rule, it waived the negotiated rulemaking requirement of the HEA. Id. at 49, 157. In doing so, the Department acknowledged that “all regulations proposed . . . for programs under Title IV of the HEA are subject to negotiated rulemaking requirements, ” unless the Department can establish “good cause” to waive the requirement. Id. It also acknowledged that “the HEA . . . requires the Secretary to publish the basis for waiving negotiations in the Federal Register at the same time as the proposed regulations in question are first published.” Id. The Department concluded that good cause existed for waiving the negotiation process because “it would not be practicable before the July 1, 2018 effective date specified in the [Interim Final Rule], to engage in negotiated rulemaking and publish final regulations” amending the Borrower Defense Regulations. Id.

         3. February 14, 2018 Final Delay Rule

         On February 14, 2018, the Department issued a final rule delaying the effective date of the Borrower Defense Regulations until July 1, 2019. William D. Ford Federal Direct Loan Program (“Final Delay Rule”), 83 Fed. Reg. 6, 458 (Feb. 14, 2018). In doing so, the Department addressed a number of comments regarding the proposed rule, both substantive and procedural.

         Responding to concerns that further delay would harm borrowers, the Department stated that, in its view, any costs of the delay were insignificant, and, in any event, “outweighed by the administrative and transaction costs for regulated entities and borrowers of having those regulations go into effect only to be changed a short while later.” Id. at 6, 460-61. The Department stressed, for example, that the 1994 borrower defense rule would remain in effect, “as [would] the statute that allows borrowers to assert defenses to repayment.” Id. at 6, 461. On the other hand, the Department observed that the Borrower Defense Regulations' prohibition on predispute arbitration clauses and class action waivers “would require some institutions to change their policies and procedures[, ] to amend their enrollment agreements, ” to re-train staff, and to send “notices to borrowers informing them of the changed class action waivers and pre-dispute arbitration provisions, ” only to “repeat or reverse these steps” in the “likely” event that the provision is rescinded or struck down. Id. at 6, 462.

         The Department was also unpersuaded by commenters' procedural objections. Id. at 6, 463-64. The Department maintained that the October 24, 2017 NPRM “properly articulated the good cause supporting” the Department's “waiver of the HEA's negotiated rulemaking requirement.” Id. at 6, 464. According to the Department:

The NPRM explained that the original catalyst for the delay was the CAPPS litigation, filed on May 24, 2017, and that it would not have been possible for the Department to engage in negotiated rulemaking and [to] publish final regulations after that date (much less after October 24, 2017, the date the NPRM was published), and prior to July 1, 2018 (the current effective date of the 2016 final regulations). Negotiated rulemaking on this discrete issue simply was not practicable. It is a time-consuming and resource-intensive process and could not practicably be completed by July 1, 2018.

Id. (italics added). The Department also rejected the argument that it needed to identify a deficiency in the underlying Borrower Defense Regulations to justify the delay. See Id. (“[A]n agency's rulemaking [need only] justify the particular action or actions to be taken by that rule.”). Rather, the Department reiterated that its earlier cost-benefit analysis of the “net budget impact of the delay” was accurate and justified the rule, although it noted that “the delay was not proposed solely on the basis of those calculations.” Id. Finally, the Department addressed a group of comments objecting to its use of the CAPPS litigation as a basis for the delay given that CAPPS had challenged only the substance of a handful of provisions in the Borrower Defense Regulations. Id. at 6, 465. The Department responded that the CAPPS litigation was not the basis for the delay from July 1, 2018 to July 1, 2019, and, that in any event, CAPPS had sought relief that would have invalidated the entire rule (on grounds of non-severability). Id.

         4. Pending Motions for Summary Judgment

         At the time the Final Delay Rule was published in the Federal Register, the parties in the then-separate actions pending before the Court had just completed a second round of summary judgment briefing that encompassed challenges to the Section 705 Stay and the Interim Final Rule. See, e.g., Dkt. 50 (Department's Reply in Support of its Cross-Motion for Summary Judgment). Following the publication of the Final Delay Rule, Plaintiffs moved to amend their respective complaints, and the Court held a status conference with the parties in all three relevant actions (Civil Action No. 17-999, Civil Action No. 17-1330, Civil Action No. 17-1331). Although Plaintiffs sought to convert their then-pending motions for summary judgment into motions for partial summary judgment on the Section 705 Stay and Interim Final Rule, see, e.g., Dkt. 52 (Borrower Plaintiffs' Motion to Convert), the Court instead denied the earlier motions as moot and ordered the parties to file renewed motions for summary judgment addressing all three delay actions. Minute Entry (Mar. 1, 2018); Minute Order (May 24, 2018). The Court also consolidated the two actions challenging the delay actions and stayed CAPPS's challenge to the Borrower Defense Regulations. Minute Entry (Mar. 1, 2018).

         II. ANALYSIS

         Plaintiffs seek to vacate the Section 705 Stay, the Interim Final Rule, and the Final Delay Rule. They assert that these regulatory actions were arbitrary and capricious, not in accordance with law, and taken without observance of the required procedures. Broadly, Plaintiffs argue that the Department impermissibly took these actions for the purpose of securing time to replace the Borrower Defense Regulations (functionally rescinding the earlier rule); that it did not adequately consider benefits to student borrowers lost through the delays; that it relied on internally inconsistent assumptions and omitted key considerations when justifying the delay rules; that it misinterpreted the HEA; and, that it failed to comply with the HEA's requirement that public consultation and negotiated rulemaking be conducted prior to the promulgation of rules affecting federal student loans. The Department, for its part, contests each of these assertions and argues that Plaintiffs lack standing.

         On the threshold question of standing, the Court concludes that it need not decide whether the state plaintiffs have carried their burden because, as the Department concedes and as the record demonstrates, the student borrower plaintiffs have standing to seek the entirety of the relief sought by all parties to the litigation. The Court then considers Plaintiffs' challenge to the Interim Final Rule-which expired on July 1, 2018-and concludes that it is moot, except for one issue, and, as to that issue, the Court concludes that the Department's interpretation of the Master Calendar Provision is contrary to law. Next, the Court examines Plaintiffs' substantive and procedural challenges to the Final Delay Rule and concludes that the Department failed to justify adequately its invocation of the good cause exception to the negotiated rulemaking requirement. Given that procedural flaw, the Court does not reach Plaintiffs' substantive challenges to the rule. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.