United States District Court, District of Columbia
CALIFORNIA ASSOCIATION OF PRIVATE POSTSECONDARY SCHOOLS, Plaintiff,
ELISABETH DeVOS, Secretary, U.S. Department of Education, et al., Defendants, MEAGHAN BAUER AND STEPHANO DEL ROSE, Defendant-Intervenors .
MEMORANDUM OPINION AND ORDER
RANDOLPH D. MOSS UNITED STATES DISTRICT JUDGE
Meaghan Bauer and Stephano Del Rose (“the
Intervenors”) are former students at the New England
Institute of Art (“NEIA”) who took out large
student loans in reliance on what they contend were false
promises by NEIA. See Dkt. 22-1; Dkt. 22-2. On
November 1, 2016, the Department of Education (“the
Department”) promulgated new rules that would have made
it easier for Bauer and Del Rose to seek administrative
relief from their debts and to bring class action claims on
behalf of other former NEIA students against NEIA. See
generally Student Assistance General Provisions, Federal
Perkins Loan Program, Federal Family Education Loan Program,
William D. Ford Federal Direct Loan Program, and Teacher
Education Assistance for College and Higher Education Grant
Program, 81 Fed. Reg. 75, 926 (Nov. 1, 2016) (to be codified
at 34 C.F.R. scattered sections) (“the 2016
Rule”). The California Association of Private
Postsecondary Schools (“CAPPS”) filed this
lawsuit challenging those new rules as unlawful and seeking
to enjoin their implementation. Dkt 1. In response to this
suit, the Department announced that it would delay
implementation of the challenged rules, see Dkt. 20,
and, in response to the Department's action, Bauer and
Del Rose then filed a separate suit challenging that delay as
unlawful, see Bauer v. DeVos, 17-1330 (filed July 6,
2017). They also moved to intervene in this case based on
their concern that the Department's decision to stay
implementation of the 2016 Rule might signal less than full
resolve to defend the rule in the present action. Dkt. 22.
The Court granted their motion to intervene. See
Dkt. 63 at 56-57 (Sept. 14, 2018 Hrg. Tr.). CAPPS now moves
for reconsideration of that decision in light of new
evidence. Dkt. 64.
reasons explained below, the Court will deny CAPPS's
motion but will order that the Intervenors show cause why the
Court should not now revoke their status as
intervenors for lack of standing.
history of the development of and challenges to the 2016 Rule
and the Department's interim and final delay rules and
the related litigation is set forth in this Court's prior
opinions denying CAPPS's motion for a preliminary
injunction, Cal. Ass'n of Private Postsecondary
Schools v. DeVos, 344 F.Supp.3d 158, 163-66 (D.D.C.
2018) (“CAPPS I”), and resolving the
parties' cross-motions for summary judgment in Bauer
v. DeVos, 325 F.Supp.3d 74, 78-87 (D.D.C. 2018). For
purposes of the present motion, an abridged version-with a
focus on the procedural history of this case-will suffice.
The regulations at the center of this lawsuit were
promulgated on November 1, 2016 and are referred to as the
“Borrower Defense Regulations” or the “2016
Rule.” 81 Fed. Reg. at 75, 926. Among other things,
these regulations prohibit schools “participating in
the [Federal] 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,
” and “from requiring students to engage in
internal dispute processes before contacting accrediting or
government agencies” regarding the claims forming the
basis of such a class action lawsuit. (“Arbitration and
Class Action Waiver Provision”). CAPPS I, 344
F.Supp.3d at 166 (quoting 81 Fed. Reg. at 75, 926-27). Under
the pre-existing rules, borrowers could apply for relief from
their loans on the ground that their educational institutions
had engaged in certain forms of misconduct. Id.
165-66. The 2016 Rule also contained a provision amending the
standards and procedures applicable to the Department's
adjudication of these so-called borrower defense applications
(“Borrower Defense Provision”). Id.
Although not relevant to CAPPS's motion for
reconsideration, challenged portions of the 2016 Rule also
require “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')” and “adopt 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').” Id. at 166 (quoting 81 Fed.
Reg. at 75, 926-27).
filed this lawsuit on May 24, 2017 challenging the 2016 Rule
in its entirety. Dkt. 1. Eight days after filing suit, CAPPS
moved for a preliminary injunction precluding portions of the
2016 Rule from taking effect. Dkt. 6. In response, the
Department issued a rule staying implementation of most, but
not all, provisions of the 2016 Rule pursuant to 5 U.S.C.
§ 705, see Dkt. 20, which allows agencies to
“postpone the effective date of an action taken by
it” if it concludes that “justice so
requires.” That action by the Department prompted CAPPS
to withdraw its motion for a preliminary injunction,
see Dkt. 21, and prompted Meaghan Bauer and Stephano
Del Rose to move to intervene as defendants in this action so
they could defend the 2016 Rule, see Dkt. 22. Eight
states and the District of Columbia also sought to intervene
to defend the 2016 Rule. Dkt. 16. Around that same time,
Bauer and Del Rose filed a separate lawsuit, Bauer v.
DeVos, l7-cv-1330 (D.D.C. filed July 6, 2017),
challenging the Department's rule staying the 2016
Rule's implementation and the interim and final rules
delaying implementation of the 2016 Rule.
Intervenors based their motion to intervene on the fact that
they had taken out large Federal Direct Loans to attend NEIA,
which, they contend, misrepresented the education and
employment opportunities it would provide to them.
See Dkt. 22 at 9-10; Dkt. 22-1; Dkt. 22-2. They
explained that they stood to benefit from the 2016 Rule in
two ways. First, they sought to bring a class action lawsuit
against NEIA and its parent company, Education Management
Corporation (“EDMC”), for various violations of
Massachusetts law, and that lawsuit would have been barred or
channeled into individual arbitration proceedings unless the
Arbitration and Class Action Waiver Provision of the 2016
Rule was allowed to take effect. See Dkt. 22 at 13.
Second, they explained, albeit in a footnote in their reply
brief, that they had each filed borrower defense applications
with the Department as a defense to repayment and would
benefit from the 2016 Rule's more borrower-friendly
procedures for adjudicating those administrative
applications. See Dkt. 44 at 12 n.1.
Court stayed the CAPPS case pending resolution of
cross-motions for summary judgment in Bauer
addressing the lawfulness of the Department's delay in
implementing the 2016 Rule. Then, in Bauer, the
Court held that the Department's § 705 stay rule and
the Department's subsequent interim and final delay rules
were invalid. Bauer, 325 F.Supp.3d at 79. On
September 14, 2018, the Court held a status conference with
the parties in both CAPPS and Bauer to
address how the litigation in both matters should proceed in
light of that holding. See Dkt. 63. During the
status conference, the Court granted the Intervenors'
motion to intervene in the CAPPS action. See
Id. at 56-57 (Sept. 14, 2018 Hrg. Tr.). The Court found
that the Intervenors had standing to defend the 2016 Rule,
notwithstanding the limited nature of their interests,
because CAPPS sought to invalidate the rule in its entirety,
and CAPPS confirmed that characterization of its challenge on
the record. See Id. at 46-47. In other words, if
CAPPS was successful in challenging any portion of the 2016
Rule, and if the remaining provisions were held
non-severable, as CAPPS maintained at that time, the entire
rule would fall. Id. The Court further concluded
that the Intervenors had satisfied the requirements of
Federal Rule of Civil Procedure 24(a), see Id.
56-57, which provides for intervention as a matter of right,
Fed.R.Civ.P. 24(a). With respect to the States' separate
motion to intervene, the Court explained that it would permit
the States to participate fully as amici in the preliminary
injunction litigation and that, as a result, resolution of
the motion to intervene would serve no material purpose at
that stage of the proceeding. Id. at 40, 53-54.
Based on that understanding, the States agreed to withdraw
their motion to intervene without prejudice, Dkt. 61, but
continued to participate fully as amici, see Dkt.
September 22, 2018, CAPPS moved for reconsideration of the
Court's order granting the Intervenors leave to intervene
and simultaneously moved for a preliminary injunction to
prevent the Department from implementing the 2016 Rule. Dkt.
64; Dkt. 65. CAPPS premised its motion for reconsideration on
the “newly discovered” fact that NEIA and EDMC
had filed for bankruptcy while the motion to intervene was
pending (but after briefing was complete) and that the
bankruptcy, according to CAPPS, deprived the Intervenors of
standing to intervene in this case. See Dkt. 64.
Department and the Intervenors filed briefs opposing
CAPPS's motion for a preliminary injunction, Dkt. 68;
Dkt. 69, and the States that had previously sought to
intervene participated as amici defending the rule, Dkt. 67.
The Court denied the motion for preliminary injunction,
concluding that, with respect to three of the four challenged
provisions, CAPPS had not demonstrated a likelihood of
success on the merits because it had not made an adequate
showing that it was likely to have standing and, in any
event, had not established that any of its members would
suffer irreparable injury. CAPPS I, 344 F.Supp.3d at
176, 178, 181. With respect to the fourth-the Arbitration and
Class Action Waiver Provisions-the Court held that CAPPS had
not shown that any of its members would suffer irreparable
injury if the preliminary injunction were denied.
Id. at 170-73.
order or decision that is not a final judgment “may be
revised at any time before the entry of a judgment
adjudicating all the claims and all the parties' rights
and liabilities.” Fed.R.Civ.P. 54(b). District courts
have “broad discretion to hear a motion for
reconsideration brought under Rule 54(b), ” Isse v.
Am. Univ., 544 F.Supp.2d 24, 29 (D.D.C. 2008), but
should grant motions for reconsideration “only as
justice requires.” Capitol Sprinkler Inspection,
Inc. v. Guest Servs., Inc., 630 F.3d 217, 227 (D.C. Cir.
2011) (quoting Greene v. Union Mut. Life Ins. Co. of
Am., 764 F.2d 19, 22-23 (1st Cir.1985)). Typically, the
Court should not grant a motion to reconsider “unless
the movant presents either newly discovered evidence or
errors of law that need correction.” Davis v.
Joseph J. Magnolia, Inc., 893 F.Supp.2d 165, 168 (D.D.C.
2012). “The burden is on the moving party to show that
reconsideration is appropriate and that harm or injustice
would result if reconsideration were denied.”
United States ex rel. Westrick v. Second Chance Body
Armor, Inc., 893 F.Supp.2d 258, 268 (D.D.C. 2012)
(citing Husayn v. Gates, 588 F.Supp.2d 7, 10 (D.D.C.
comes to Court with newly discovered-and
significant-evidence: while the motion to intervene was
pending, NEIA and EDMC filed for bankruptcy. The Intervenors
concede that this bankruptcy filing rendered their
“earlier plans to sue NEIA and EDMC as defendants who
might possibly pay a judgment . . . no longer viable.”
Dkt. 71 at 10. Indeed, as institutions that had filed for
bankruptcy, NEIA and EDMC were no longer subject to the 2016
Rule. See 20 U.S.C. § 1002(a)(4)(A). CAPPS
argues, then, that because the Intervenors could not have
brought suit against NEIA and EDMC at the time this Court
decided the motion to intervene for reasons wholly
independent of the challenged Arbitration and Class Action
Waiver Provision, they lacked standing to intervene. Dkt. 64
at 12-13. And, CAPPS argues, because the decision permitting
them to intervene was predicated on the false premise that