121 F.4th 32
9th Cir.2024Background
- Over 500,000 federal student loan borrowers filed a class action against the U.S. Department of Education (DOE), alleging the agency had unlawfully failed to process borrower defense (BD) applications for loan relief.
- An initial 2020 settlement, requiring DOE to process all applications within 18 months, failed when DOE issued mass denials; a supplemental complaint was filed.
- A second settlement divided class members into three relief groups—and granted automatic discharges for those associated with schools on “Exhibit C,” alleged to have strong indicia of misconduct (including Everglades College, Lincoln Educational Services, and American National University, the “Schools”).
- The Schools, listed on Exhibit C, sought to intervene, claiming reputational harm from being publicly named as institutions with presumed misconduct, and challenged the settlement’s approval.
- The district court denied intervention as of right, allowed only permissive intervention for the purposes of objecting to the settlement, and ultimately approved the settlement—spurring this appeal by the Schools.
- The Ninth Circuit considered standing, mootness, and intervention rights, with a dissent arguing that the Schools should have been allowed to fully object and that the settlement exceeded statutory authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III Standing for Schools (Intervenors) | Schools suffered reputational harm justifying standing | No concrete harm to Schools sufficient for Article III | Schools have Article III standing due to reputational harm |
| Prudential Standing to Challenge Settlement | Inclusion in settlement causes prejudice to Schools | Only parties/formally prejudiced non-parties may object | Schools lack prudential standing; no formal legal prejudice shown |
| Mootness of the Underlying Dispute | DOE’s partial resolution did not moot new claims | Claims mooted by processing many applications | Not moot; supplemental claims still extant and voluntary cessation not enough |
| Intervention as of Right Under Rule 24(a) | Needed to protect significant legal and financial interests | No protectable interest; settlements don't prejudice Schools | No error in denying intervention as of right; no significant interest or prejudice |
Key Cases Cited
- Warth v. Seldin, 422 U.S. 490 (constitutional and prudential standing must be evaluated separately)
- Spokeo, Inc. v. Robins, 578 U.S. 330 (concrete harm required for standing)
- Lexmark Int’l, Inc. v. Static Control Components, 572 U.S. 118 (prudential standing and zone-of-interests)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (limitations on monetary relief in Rule 23(b)(2) class actions)
- Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528 U.S. 167 (voluntary cessation does not moot a claim)