370 F. Supp. 3d 1
D.C. Cir.2019Background
- PSLF Program (20 U.S.C. § 1087e(m)) forgives federal student loans after 120 qualifying monthly payments while employed in public service; Dept. of Education implemented an Employment Certification Form (ECF) process to allow borrowers to certify interim eligibility. 34 C.F.R. § 685.219.
- Plaintiffs: American Bar Association (ABA) and four individual borrowers (Quintero‑Millan, Burkhart, Voigt, Rudert) challenged Department reversals that rescinded prior ECF eligibility determinations for employment at non‑501(c)(3) nonprofits.
- Individual Plaintiffs received initial approvals via ECFs, then received later denial letters concluding their employers did not provide qualifying public services; ABA received letters saying it did not qualify as a public service organization.
- Plaintiffs allege the Department adopted new, heightened interpretive standards for non‑501(c)(3) employers ("Primary Purpose," "School‑like Setting," and "Outright Provision of Services") without notice or reasoned explanation, violating the APA and (for some) the Fifth Amendment.
- Court found the denial letters to the Individual Plaintiffs were final agency actions reviewable under the APA; letters to the ABA were not final agency actions and thus not reviewable under the APA.
- Court granted extra‑record review of emails/manuals showing implementation of new standards, held the Department acted arbitrarily and capriciously in adopting and applying the Primary Purpose and School‑like Setting standards without acknowledging the change, providing reasoned explanation, or accounting for reliance; vacated those standards and remanded as to Quintero‑Millan, Burkhart, and Voigt; ruled for Defendants on claims by Rudert and ABA and on all Due Process claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Finality of denial letters | Denial letters rejecting ECFs are final agency actions affecting borrowers' rights to count payments | Letters are provisional; final eligibility occurs only after 120‑payment forgiveness application | Denial letters to Individual Plaintiffs are final; letters to ABA are not final agency actions |
| Whether Dept. changed interpretive standards | Dept. adopted new standards (Primary Purpose; School‑like Setting; Outright Provision) and applied them retroactively to revoke prior approvals | Dept. says no change—consistent application or earlier approvals were contractor errors; any changes were not a final rule | Dept. did change practice re: Primary Purpose and School‑like Setting; not shown to have changed for Outright Provision in Rudert's case |
| APA procedural obligations when agency changes practice | Agency must display awareness of change, provide reasoned explanation, account for reliance; Dept. did none | Dept. contends no change occurred, so no additional procedure required; even if interpretive, publication not required | Dept. acted arbitrarily and capriciously by adopting Primary Purpose and School‑like Setting without required reasoned decisionmaking; vacated those standards and remanded as to affected plaintiffs |
| Due Process / property interest | ABA and Rudert claim deprivation of property interest in PSLF eligibility/status | Dept. says PSLF creates rights only for borrowers; ABA as employer has no entitlement; Rudert not entitled because Dept. found his employment non‑qualifying | Plaintiffs lack a protected property interest; Due Process claims fail |
Key Cases Cited
- Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (zone‑of‑interests test is not especially demanding in APA suits)
- Bennett v. Spear, 520 U.S. 154 (Bennett two‑prong finality test: consummation and legal consequences)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (arbitrary and capricious standard; reasoned explanation required for agency changes)
- Sackett v. EPA, 566 U.S. 120 (possibility of agency reconsideration does not render otherwise final action nonfinal)
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (agency action lacking minimal analysis is arbitrary and capricious)
- Ciba‑Geigy Corp. v. EPA, 801 F.2d 430 (apply finality requirement flexibly and pragmatically)
- Jicarilla Apache Nation v. U.S. Dep't of the Interior, 613 F.3d 1112 (agency changing course must supply a reasoned analysis)