United States District Court, District of Columbia
CALIFORNIA ASSOCIATION OF PRIVATE POSTSECONDARY SCHOOLS, Plaintiff,
v.
ELISABETH DEVOS, in her official capacity as Secretary of the U.S. Department of Education, et al., Defendants,
MEMORANDUM OPINION AND ORDER
RANDOLPH D. MOSS UNITED STATES DISTRICT JUDGE
This is
not the first (and presumably not the last) chapter in a
dispute about the fate of regulations that the Department of
Education promulgated in November 2016 to address perceived
deficiencies in the William D. Ford Federal Direct Loan
Program (“Direct Loan Program”), which allows
students who attend participating schools to obtain federal
loans. The regulations were intended to “protect
student loan borrowers from misleading, deceitful, and
predatory practices.” William D. Ford Federal Direct
Loan Program (“2016 Rule”), 81 Fed. Reg. 75, 926
(Nov. 1, 2016). Shortly before the 2016 Rule was scheduled to
take effect, Plaintiff California Association of Private
Postsecondary Schools (“CAPPS”) brought this
action seeking to set the rule aside in its entirety. Dkt. 1
at 75-76. About a week later, CAPPS moved preliminarily to
enjoin the implementation or enforcement of a single
provision, which prohibits participants in the Direct Loan
Program from employing predispute arbitration clauses and
class action waivers in certain disputes with
student-borrowers (“Arbitration and Class Action Waiver
Provision”). Dkt. 6. That motion was never fully
briefed or decided, however, because the Department of
Education, on its own accord, stayed the effective date of
most of the 2016 Rule pursuant to 5 U.S.C. § 705 pending
resolution of this case. William D. Ford Federal Direct Loan
Program (“Section 705 Stay”), 82 Fed. Reg. 27,
621 (June 16, 2017).
The
Department's Section 705 Stay led to the next chapter of
the dispute. Within weeks of issuance of the stay, two
student-borrowers and a coalition of nineteen states and the
District of Columbia filed separate lawsuits seeking to
invalidate the stay. See Bauer v. DeVos, No.
17-cv-1330 (D.D.C. filed July 6, 2017); Massachusetts v.
Dep't of Education, No. 17-cv-1331 (D.D.C. filed
July 6, 2017). The Department subsequently issued an interim
final rule on October 24, 2017, staying the effective date of
the 2016 Rule to July 1, 2018, and then issued a final rule
staying the effective date for another year. See
William D. Ford Federal Direct Loan Program (“Interim
Final Rule”), 82 Fed. Reg. 49, 114 (Oct. 24, 2017);
William D. Ford Federal Direct Loan Program (“Final
Delay Rule”), 83 Fed. Reg. 6, 458 (Feb. 14, 2018). With
each new rulemaking, the student-borrower and state
plaintiffs amended their complaints to challenge the new
action. The Court consolidated the Bauer and
Massachusetts cases and, on September 12, 2018,
issued an opinion resolving the consolidated action.
Bauer v. DeVos, No. 17-cv-1330, 2018 WL 4353656
(D.D.C. Sept. 12, 2018) (“Bauer I”). In
that decision, the Court held that the Section 705 Stay was
arbitrary and capricious and thus unlawful under the
Administrative Procedure Act (“APA”); that the
Interim Final Rule was, for the most part, moot; and that the
Final Delay Rule was issued in violation of the Higher
Education Act's negotiated rulemaking requirement.
Id. Five days later, the Court entered a remedial
order vacating the Final Rule and Section 705 Stay but
staying vacatur of the Section 705 Stay until October 12,
2018. Bauer v. DeVos, No. 17-cv-1330, 2018 WL
4483783 (D.D.C. Sept. 17, 2018) (“Bauer
II”). On October 12, 2018, the Court extended that
stay until noon on October 16, 2018. Minute Order (Oct. 12,
2018), Bauer, No. 17-cv-1330.[1]
The
Bauer I decision, in turn, opened the current
chapter of the dispute. Two days after issuing that decision,
the Court held a status conference in this action and set a
schedule for CAPPS to renew its motion for a preliminary
injunction to enjoin the 2016 Rule, which would go into
effect upon expiration of the Court's stay. See
Minute Order (Sept. 17, 2018). The Court also granted the
Bauer plaintiffs leave to intervene
(“Bauer Intervenors”) and granted the
interested states and the District of Columbia leave to
participate as amici (“State
Amici”).[2] See Minute Entry (Sept 14, 2018);
Minute Order (Sept. 18, 2018). On September 22, 2018, CAPPS
filed the pending motion for a preliminary injunction. Dkt.
65. This time, however, CAPPS has sought preliminarily to
enjoin four provisions of the 2016 Rule: (1) the Arbitration
and Class Action Waiver that it targeted in its original
motion; (2) the “Financial Responsibility
Provision;” (3) the “Repayment Rate
Provision;” and (4) the “Borrower Defense
Provision.” Id. at 17. The United States and
Bauer intervenors filed briefs in opposition, and
the states and the District of Columbia filed an amicus brief
in opposition. See Dkt. 67 (State Amici); Dkt. 68
(Bauer Intervenors); Dkt. 69 (United States). CAPPS
filed a reply brief on October 8, 2018, Dkt. 72, and the
Court held oral argument the following day, Minute Order
(Oct. 9, 2018).
Each of
the four provisions that CAPPS seeks to enjoin raises a
distinct set of issues; overall, CAPPS raises
twenty-four challenges to the four provisions. As to
most of the challenged provisions, CAPPS has failed to
demonstrate that it has standing or that the dispute is ripe
for decision. Moreover, with respect to each of the four
provisions, CAPPS has failed to carry its burden of
demonstrating that any one of its members is likely to suffer
an irreparable injury in the absence of an injunction.
Because irreparable injury is the sine qua non for
obtaining a preliminary injunction, that flaw is dispositive.
In light of these threshold obstacles, the Court need not
reach the merits of the plethora of substantive arguments
that CAPPS raises- and, indeed, concludes that it would not
be prudent to do so on such an abbreviated schedule. Those
issues, in short, are for the next chapter.
The
Court will, accordingly, deny the motion for a preliminary
injunction and will set a schedule for cross-motions for
summary judgment.
I.
BACKGROUND
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). To participate in the Direct
Loan Program, institutions of higher education must enter
into contracts, called Program Participation Agreements
(“PPAs”), with the Secretary of Education and
agree to comply with the HEA, all applicable regulations, and
certain other conditions. See 20 U.S.C. §§
1087c(a), 1094(a)(4); 34 C.F.R. §§ 668.14,
685.300(b). These contracts 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. 20 U.S.C. §
1087d(a)(6); see also id. § 1087c.
By
statute, students who are harmed by a Title IV school's
violation of certain laws, including prohibitions on fraud,
may be entitled to relief from their federal Direct Loan
obligations through a process known as “borrower
defense” to repayment. Id. § 1087e(h);
see also 34 C.F.R. § 685.206(c). 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. 20 U.S.C. § 1087e(h). 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.
Pursuant
to these authorities, in January 1994, the Secretary issued
“standards, criteria, and procedures governing the
Federal Direct Student Loan . . . program, ” including
the first iteration of the Borrower Defense Rule. Federal
Direct Student Loan Program, 59 Fed. Reg. 472, 472 (Jan. 4,
1994). 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), and
under those regulations, borrowers were 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). The 1994
regulations (1) permitted a student borrower to assert her
school's misconduct as a reason for nonrepayment, and (2)
if the borrower was successful, permitted the Department of
Education to recoup the loan from the school. Id.
§ 685.206(c)(2), (3).
The
adequacy of the 1994 Borrower Defense Rule was tested by the
collapse of Corinthian Colleges in May 2015. See
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, a for-profit company that
“operat[ed] numerous postsecondary schools that
enrolled over 70, 000 students at more than 100 campuses
nationwide, ” id. at 39, 335, filed for
bankruptcy in 2015. In the wake of Corinthian's closure,
the Department ultimately determined “that the college
had misrepresented its job placement rates.”
Id. In the aftermath, “thousands of claims for
student loan relief” were filed, and Corinthian's
bankruptcy meant that there was “no other party from
which the Federal government [could] recover any
losses.” 2016 Rule, 81 Fed. Reg. at 76, 022. The
Department concluded, against this backdrop, that the 1994
borrower defense rule was outdated and was no longer adequate
to deal with the changed “landscape of higher
education.” June 16, 2016 NPRM, 81 Fed. Reg. at 39,
335.
To
address these perceived deficiencies, the Department
commenced a rulemaking, and on November 1, 2016, it published
the final rule governing the Direct Loan Program that is at
issue in the present action. 2016 Rule, 81 Fed. Reg. at 75,
926. In relevant part, the 2016 Rule: (1) prohibits 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”
(“Arbitration and Class Action Waiver
Provision”); (2) requires “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” (“Financial
Responsibility Provision”); (3) adopts certain
disclosure obligations for 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” (“Repayment Rate
Provision”); and (4) amends the standards and
procedures applicable to the borrower defense process
(“Borrower Defense Provision”). Id. at
75, 926-27.
CAPPS
seeks preliminarily to enjoin the implementation of each of
these provisions.
II.
ANALYSIS
“A
preliminary injunction is an extraordinary remedy never
awarded as of right, ” Winter v. Natural Res. Def.
Council, 555 U.S. 7, 24 (2008), but “only when the
party seeking the relief, by a clear showing, carries the
burden of persuasion, ” Cobell v. Norton, 391
F.3d 251, 258 (D.C. Cir. 2004). To secure a preliminary
injunction, a plaintiff “must establish that he is
likely to succeed on the merits, that he is likely to suffer
irreparable harm in the absence of preliminary relief, that
the balance of equities tips in his favor, and that an
injunction is in the public interest.” Winter,
555 U.S. at 20. Although the moving party may rely on
“evidence that is less complete than in a trial on the
merits, ” NRDC v. Pena, 147 F.3d 1012, 1023
(D.C. Cir. 1998), he nevertheless “bear[s] the burden
of produc[ing] . . . credible” evidence sufficient to
demonstrate his entitlement to injunctive relief, R.I.L-R
v. Johnson, 80 F.Supp.3d 164, 173 (D.D.C. 2015)
(quotation marks omitted) (first alteration in original).
Before
the Supreme Court's decision in Winter, courts
in this circuit applied a “sliding-scale”
approach to the preliminary injunction analysis under which
“a strong showing on one factor could make up for a
weaker showing on another.” Sherley v.
Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011). Since
Winter, the D.C. Circuit has hinted on several
occasions that “a likelihood of success is an
independent, freestanding requirement for a preliminary
injunction, ” id. at 393 (quoting Davis v.
Pension Benefit Guar. Corp., 571 F.3d 1288, 1296 (D.C.
Cir. 2009)), but it “has not yet needed to decide the
issue, ” League of Women Voters of United States v.
Newby, 838 F.3d 1, 7 (D.C. Cir. 2016); see also Am.
Meat Inst. v. U.S. Dep't of Agric., 746 F.3d 1065,
1074 (D.C. Cir. 2014), reinstated in relevant part
by 760 F.3d 18 (D.C. Cir. 2014) (“This circuit has
repeatedly declined to take sides . . . on the question of
whether likelihood of success on the merits is a freestanding
threshold requirement to issuance of a preliminary
injunction.”) (en banc); Sherley, 644 F.3d at
393 (reading “Winter at least to suggest if
not to hold ‘that a likelihood of success is an
independent, free-standing requirement for a preliminary
injunction'” but declining to decide the issue
(quoting Davis, 571 F.3d at 1296)).
But,
regardless of whether the sliding scale approach applies, a
party seeking a preliminary injunction must clear two,
non-negotiable hurdles. First, a court must-at each
successive stage of the proceeding-evaluate whether it has
jurisdiction to provide the relief sought, and it must do so
through the lens of the standard applicable at that stage of
the proceeding. Lujan v. Defs. of Wildlife, 504 U.S.
555, 561 (1992). As a result, “a party who fails to
show a ‘substantial likelihood' of standing is not
entitled to a preliminary injunction.” Food &
Water Watch, Inc. v. Vilsack, 808 F.3d 905, 913 (D.C.
Cir. 2015) (citation omitted). That same reasoning, moreover,
extends to other jurisdictional prerequisites, such as
ripeness.
Second,
as Winter makes clear, a mere
“possibility” of irreparable harm will not
suffice. Winter, 555 U.S. at 22. “Rather, a
showing that irreparable injury is ‘likely' is the
sine qua non for obtaining a preliminary
injunction-it is what justifies the extraordinary remedy of
granting relief before the parties have had the opportunity
fully to develop the evidence and fully to present their
respective cases.” Achagzai v. Broad. Bd. of
Governors, No. 14-cv-768, 2016 WL 471274, at *3-4
(D.D.C. Feb. 8, 2016); see also Chaplaincy of Full Gospel
Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006)
(“A movant's failure to show any irreparable harm
is therefore grounds for refusing to issue a preliminary
injunction, even if the other three factors entering the
calculus merit such relief.”); Texas Children's
Hosp. v. Burwell, 76 F.Supp.3d 224, 241-42 (D.D.C.
2014); Trudeau v. FTC, 384 F.Supp.2d 281, 296
(D.D.C. 2005), aff'd, 456 F.3d 178 (D.C. Cir.
2006). As a result, if the moving party fails to demonstrate
that it is likely to suffer an irreparable injury, the Court
must deny the motion.
With
these guideposts in mind, the Court will consider whether
CAPPS has established that there is a “substantial
likelihood” that the Court has Article III jurisdiction
to consider its challenge to each of the four provisions at
issue and whether it has shown that the association, or one
of its members, is likely to suffer an irreparable injury if
the Court does not issue a preliminary injunction.
A.
Arbitration and Class Action Waiver
The
first of the provisions that CAPPS seeks to enjoin adds
conditions to the Direct Loan Program Participation
Agreements-or “PPAs”-that participating schools
must enter with the Secretary of Education in order to
receive Title IV funding. 2016 Rule, 81 Fed. Reg. at 75, 927.
To qualify as a “participating institution, ” a
school must enter a PPA promising to undertake an array of
responsibilities, such as estimating the needs of
student-borrowers, reconciling certain records on a monthly
basis, and implementing a quality assurance system. 34 C.F.R.
§ 685.300. As relevant here, the 2016 Rule amended this
regulation to require that each participating school must
also agree that (1) it “will not seek to rely in any
way on a predispute arbitration agreement or on any other
predispute agreement with a student who has obtained or
benefited from a Direct Loan, with respect to any aspect of a
class action that is related to a borrower defense
claim;” (2) it “will not enter into a predispute
agreement to arbitrate a borrower defense claim, or rely in
any way on a predispute arbitration agreement with respect to
any aspect of a borrower defense claim;” and (3) if the
school has existing contracts with student-borrowers that
include covered predispute class action waivers or
arbitration agreements, “the school must either ensure
[that] the agreement[s] [are] amended . . . or provide the
student[s] with written notice” that it will not
“use” the predispute class action waivers or
arbitration agreements. 2016 Rule, 81 Fed. Reg. at 76, 087-88
(34 C.F.R. § 685.300(e)(1), (e)(3)(ii), (e)(3)(iii)(B),
(f)(1), (f)(3)(ii), (f)(3)(iii)(B)).
According
to CAPPS, these additional conditions “conflict
with” the Federal Arbitration Act (“FAA”),
9 U.S.C. § 2; exceed the Secretary's authority under
the HEA, 20 U.S.C. 1087d; were promulgated in violation of
the APA, 5 U.S.C. § 702(2); and violate the Due Process
Clause. See Dkt. 65 at 11-20. For present purposes,
however, the Court does not reach these questions but,
instead, considers whether CAPPS has established standing to
bring these claims and, if so, whether it has established
that at least one of its members is likely to suffer an
irreparable injury if the Court does not issue a preliminary
injunction. The answer to the first question is “yes,
” but the answer to the second is “no.” As
a result, the Court must deny CAPPS's motion for a
preliminary injunction with respect to the Arbitration and
Class Action Waiver Provision.
1.
Standing
As a
first step, the Court must consider whether CAPPS has met its
burden of establishing a “substantial likelihood”
that it has standing to challenge the Arbitration and Class
Action Waiver Provision. See Food & Water Watch,
Inc., 808 F.3d at 913. When an association, like CAPPS,
seeks to establish standing, it may proceed in one of two
ways: it may show that the association has
“organizational standing” to sue on its own
behalf, or it may demonstrate that it has
“associational standing” to sue on behalf of its
members. See Public Citizen, Inc. v. Trump, 297
F.Supp.3d 6, 17 (D.D.C. 2018). Here, CAPPS relies only on the
latter theory.
Associational
standing is premised on the theory that the plaintiff is not
seeking a remedy on its own behalf but, rather, is proceeding
“as the representative of its members.” Warth
v. Seldin, 422 U.S. 490, 511 (1975). As such, the
plaintiff need not establish that it has standing to sue in
its own right, but must show that (1) at least one of
“its members would otherwise have standing to sue in
[her] own right, ” (2) the interests that the
association “seeks to protect” in the litigation
“are germane to the organization's purpose, ”
and (3) “neither the claim asserted nor the relief
requested requires the participation of individual members in
the lawsuit.” Hunt v. Wash. State Apple Advert.
Comm'n, 432 U.S. 333, 343 (1977). Viewed through the
lens of the pending motion, the Court has little difficulty
in concluding that CAPPS is “likely” to satisfy
the second and third prongs of the Hunt test.
According to the CAPPS's executive director, Robert
Johnson, CAPPS provides its member schools with advice
regarding compliance with regulatory mandates and assists
“in the drafting of enrollment agreements and
arbitration provisions.” Dkt. 65-2 at 1 (Johnson Decl.
¶ 1). And this is not a case-like a damages action, for
example-that requires the participation of individual
members. The first prong-the requirement that at least one
member have standing to sue-however, requires more detailed
analysis.
The
standing inquiry begins with the oft-quoted test articulated
in Lujan v. Defenders of Wildlife:
[T]he irreducible constitutional minimum of standing contains
three elements. First, the plaintiff must have suffered an
“injury in fact”-an invasion of a legally
protected interest which is (a) concrete and particularized,
. . . and (b) “actual and imminent, not
‘conjectural' or ‘hypothetical.'” .
. . Second, there must be a causal connection between the
injury and the conduct complained of-the injury has to be
“fairly . . . trace[able] to the challenged action of
the defendant, and not . . . th[e] result [of] the
independent action of some third party not before the
court.” . . . . Third, it must be “likely”
as opposed to merely “speculative, ” that the
injury will be “redressed by a favorable
decision.”
504 U.S. 555, 560 (1992) (alterations in original) (internal
citations omitted). Because standing must be evaluated on a
claim-by-claim basis, Friends of the Earth, Inc. v.
Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 185 (2000),
and because standing must be assessed in light of the
standard applicable at the relevant stage of the proceeding,
Lujan, 504 U.S. at 561, this means that CAPPS must
establish a “substantial likelihood” that at
least one of its members (1) will suffer an “actual and
imminent” injury, (2) that is “fairly
traceable” to each of the challenged provisions, and
(3) that “the injury will be redressed by a favorable
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