351 F. Supp. 3d 26
D.C. Cir.2018Background
- The District of Columbia enacted D.C. Law 21-214 and Final Rules requiring student‑loan servicers to obtain a DC license and submit reports, bonds, audits, and annual re‑registration to service loans of D.C. residents; an Ombudsman was also created.
- Plaintiff Student Loan Servicing Alliance (SLSA), representing major servicers that service most FDLP and FFELP loans, sued claiming the DC law is preempted by federal law (HEA) and violates the Supremacy Clause; the U.S. filed a statement of interest supporting preemption.
- Federal student loans at issue fall into three categories: FDLP (federally owned), Government‑Owned FFELP (purchased by ED under ECASLA), and Commercial FFELP (private lenders, federally guaranteed/reinsured).
- The Department of Education (DOED) issued an informal Preemption Notice asserting HEA and its regs preempt state licensing of servicers; the court declined to defer to that Notice.
- District sought dismissal; parties filed cross motions for summary judgment. Court found SLSA has standing and proceeded to merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Express preemption under 20 U.S.C. § 1098g ("disclosure requirements") | §1098g bars any state disclosure/reporting requirements by servicers, so DC licensing (which requires reports/disclosures) is expressly preempted | §1098g targets lender↔borrower disclosures only; DC reporting to regulator is not covered | Court: §1098g does not clearly reach DC's regulator‑oriented reporting; express preemption not established |
| Field preemption — did Congress occupy the field of servicer regulation? | HEA and federal regs create pervasive, uniform federal scheme occupying the field | States retain traditional consumer‑protection authority; HEA sets minimums not a ceiling | Court: HEA does not occupy the field; field preemption fails |
| Conflict (obstacle) preemption as to servicers who contract with ED (FDLP & Government‑Owned FFELP) | DC licensing imposes extra conditions that second‑guess federal contracting choices and thus obstruct federal objectives | DC says rules are neutral business requirements and contracts require compliance with state law | Court: Licensing as applied to servicers performing under federal contracts is conflict‑preempted (Leslie Miller line) — DC law preempted for FDLP and Government‑Owned FFELP loans |
| Conflict / intergovernmental immunity as to Commercial FFELP loans (private‑lender contracts) | Same preemption should apply across all loan types; DOED Notice supports preemption | For Commercial FFELP loans federal interest is weaker (guarantor only); DC law regulates private actors non‑discriminatorily | Court: No conflict or intergovernmental‑immunity violation as to Commercial FFELP loans; DC law stands for those loans |
Key Cases Cited
- Leslie Miller, Inc. v. Arkansas, 352 U.S. 187 (1956) (state licensing that effectively reviews or vetoes federal contractor responsibility is preempted)
- Sperry v. Florida ex rel. Florida Bar, 373 U.S. 379 (1963) (state licensing requirements yield where federal statute authorizes activity)
- North Dakota v. United States, 495 U.S. 423 (1990) (intergovernmental immunity: neutral state laws regulating suppliers are generally permissible; direct regulation or discrimination against federal government is barred)
- Wyeth v. Levine, 555 U.S. 555 (2009) (agency preemption statements in informal guidance receive Skidmore, not Chevron/Auer, deference)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (framework for deference to agencies' statutory interpretations)
- Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996) (presumption against preemption; courts should not lightly infer Congress intended to displace state law)