ANA SALAZAR, MARILYN MERCADO, ANA BERNARDEZ, JEANNETTE POOLE, LISA BRYANT, CHERRYLINE STEVENS, EDNA VILLATORO, оn behalf of themselves and others similarly situated, Plaintiffs-Appellants, v. JOHN B. KING, JR., in his official capacity as Secretary of the United States Department of Education, Defendant-Appellee.
15-832-cv
United States Court of Appeals for the Second Circuit
Decided: May 12, 2016
August Term, 2015
August Term, 2015
(Argued: November 4, 2015 Decided: May 12, 2016)
Docket No. 15-832-cv
ANA SALAZAR, MARILYN MERCADO, ANA BERNARDEZ, JEANNETTE POOLE, LISA BRYANT, CHERRYLINE STEVENS, EDNA VILLATORO, on behalf of themselves and others similarly situated,
Plaintiffs-Appellants,
— v. —
JOHN B. KING, JR., in his official capacity as Secretary of the United States Department of Education,*
Defendant-Appellee.
B e f o r e:
HALL and LYNCH, Circuit Judges, and RAKOFF, District Judge.**
VACATED AND REMANDED.
EILEEN CONNER (Beth E. Goldman, Jane Greengold Stvens, Danielle Tarantolo, Jason Glick, on the brief), New York Legal Assistance Group, New York, NY, for Plaintiffs-Appellants.
CHRISTINA S. POSCABLO (Ellen London, Emily E. Daughtry, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York , New York, NY, for Defendant-Appellee.
Toby R. Merrill, Legal Services Center of Harvard Law School, Jamaica Plain, MA, for Amici Curiae East Bay Community Law
GERARD E. LYNCH, Circuit Judge:
Plaintiffs-Appellants Ana Salazar, Marilyn Mercado, Ana Bernardez, Jeannette Poole, Lisa Bryant, Cherryline Stevens, and Edna Villatoro, (“plaintiffs”) brought this class action against Defendant-Appellee Arne Duncan, in his official capacity as the Secretary of the United States Department of Education (“DOE”).1
Plaintiffs allege that federal student loans were fraudulently procured on their behalf when the Wilfred American Educational Corporation’s (“Wilfred”) for-profit beauty schools falsely certified that plaintiffs had an ability-to-benefit (“ATB”) from the education they received from Wilfred. Plaintiffs allege that the DOE’s refusal to temporarily suspend collection of the student loan debt of putative class members, and refusal to send them notice of their potential eligibility for a discharge, was arbitrary and capricious in violation of the Administrative Procedure Act (“APA”). The United States District Court for the Southern District of New York (Robert W. Sweet, Judge) granted the
As a preliminary matter, the DOE argues that the case has become moot because all the named plaintiffs’ Wilfred loans have now been discharged. We have jurisdiction to review this case because the plaintiffs had standing when they filed their class action complaint and this case fits into the narrow exception to the mootness doctrine for class action claims that are “inherently transitory.” Exercising our jurisdiction to review plaintiffs’ APA challenge, we hold that plaintiffs are entitled to judicial review because there is sufficient law to apply to the challenged agency decisions. The text of the relevant statute directs that the DOE “shall” discharge a borrower’s loan liability when a school has falsely certified a student’s ATB. DOE’s regulations and informal agency guidance direct that the DOE “shall” temporarily suspend collection on loans and notify borrowers of their possible eligibility for a discharge when the DOE has reliable information that a borrower “may be eligible” for dicharge. We therefore hold that plaintiffs’ claims are judicially reviewable under the APA. Accordingly, we
BACKGROUND
I. Statutory and Regulatory Structure of Student Loan Discharge
Title IV of the Higher Education Act of 1965 (“HEA”),
and William D.
Ford Federal Direct Loans (“Direct Loans”), id.
To qualify for federal educational financial assistance under either loan program, a student must attend an eligible institution and must have a high school diploma or recognized equivalent. If the student lacks a diploma, the institution must demonstrate the student has an ATB from the training that she
The ATB test, which between 1987 and 1991 was based on criteria developed by private accrediting agencies and could be administered and evaluated by the school itself, proved to be a target of fraud; some schools falsified results or never even gave prospective students the test. See U.S. Dep’t of Educ., GEN-89-55, Dear Colleague Letter, at 4 (Dec. 1989). Although after 1991, the ATB tests had to be approved by the DOE and independently administered, and after 1992 the DOE specified a required score, fraudulent ATB testing continued unabated. See U.S. Dep’t of Educ., GEN-91-20, Dear Colleague Letter, at 1-2 (June 1991); DCL 95-42 at 2; U.S. Gov’t Accountability Office, GAO-09-600, Proprietary Schools: Stronger Department of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid 22 (2009) (“Through separate investigations at proprietary schools, we, along with
Similarly, the Senate Permanent Subcommittee on Investigations Report found that students were the victims of “unscrupulous and dishonest school operators” of private, for-profit trade and other vocational institutions that provide postsecondary education that “leav[e] them with huge debts and littlе or no education.” Abuses in Federal Student Aid Programs, S. Rep. 102-58, at 10 (1991). The subcommittee also found that “a virtually complete breakdown in effective regulation and oversight had opened the door for fraud, abuse, and other serious problems at every level.” S. Rep. 102-58, at 11.
In response to these findings of pervasive fraud in federal student loans and contentions of lack of adequate supervision by DOE, Congress passed a statute in 1992 directing that the Secretary of the United States DOE (“Secretary”) “shall discharge the borrower’s liability on the loan (including interest and collection fees) by repaying the amount owed on the loan” if the borrower received a federal student loan on or after January 1, 1986, and the “student’s eligibility to borrow under this part was falsely certified by the eligible
To implement the statute, the Secretary issued two similar regulations, one
to govern the FFEL program and one to govern the Direct Loans program. Both
state that the Secretary “shall discharge the borrower’s liability on [a] loan” made
after 1986 when the “student’s eligibility to bоrrow under this part was falsely
certified.” Id.
The regulation governing the FFEL program provides that
[i]f the guaranty agency receives information it believes to be reliable indicating that a borrower whose loan is
held by the agency may be eligible for a discharge under paragraph (e) [“False certification by a school of a student’s eligibility to borrow”] of this section, the agency shall immediately suspend any efforts to collect from the borrower on any loan received for the program of study for which the loan was made (but may continue to receive borrower payments), and inform the borrower of the procedures for requesting a discharge.
Another regulation speaks directly to the DOE’s obligations under the Direct Loan program, stating:
If the Secretary determines that a borrower’s Direct Loan may be eligible for a discharge under this section, the Secretary mails the borrower a disclosure application and an explanation of the qualifications and procedures for obtaining a discharge. The Secretary also promptly suspends any efforts to collect from the borrower on any affected loan. The Secretary may continue to receive borrower payments.
In addition to the statute and regulations, the DOE has issued Dear Colleague Letters (“DCLs”) to provide additional guidance about discharges based on a school’s fraudulent determination of a student’s ATB. Two DCLs provide specific guidance concerning the evidence that guaranty agencies and
The Secretary, as the head of the DOE, is required to try to collect federally
guaranteed student loan debt. See
II. Factual Background5
Plaintiffs are former students of a (now-defunct) chain of for-profit beauty schools run by Wilfred. Each alleges that Wilfred fraudulently certified that she was eligible for federal student aid by falsely certifying that she had the ATB from a Wilfred program. All of their loans were initiated under the FFEL program; however, some borrowers later consolidated their FFEL loans under the Direct Loan program. Plaintiffs allege that the DOE knows that Wilfred fraudulently certified the eligibility of a large percentage of borrowers, but has failed to notify plaintiffs that they may be eligible for relief and has continued to collect on their loans. Plaintiffs brought this action on behalf of themselves and a proposed class consisting of “many thousands of individuals” whose eligibility for federal student loans was falsely certified by the Wilfred schools beginning in 1986. JA 20 ¶ 48.
The facts alleged by the named plaintiffs include examples of the fraud that plaintiffs allege is common to the class. According to the complaint, not one of the named plaintiffs was ever asked if she had a high school diploma or its equivalent. Further, no named plaintiff was given a test to determine if she had the “ability to benefit” from the Wilfred program, as required in lieu of a high school diploma. Severаl plaintiffs allege that the Wilfred campus they attended was closed without advance notice, making it impossible for them to complete the program.
A. The Named Plaintiffs
Plaintiff Ana Salazar alleges that she was recruited to attend Wilfred in late 1988. She did not have a high school diploma or its equivalent and was not given an ATB test. Salazar did not speak English, but was told she qualified and was given forms to sign in English. The Wilfred school she attended closed without warning, and she was unable to finish the program. She made payments toward her Wilfred debt for thirteen years, pursuant to a payment plan arranged with collectors of the debt. The IRS seized her federal income tax refund approximately five times at the direction of the DOE. Sаlazar never received any
Plaintiff Marilyn Mercado dropped out of school in junior high and enrolled in Wilfred Academy at age seventeen. She did not have a high school diploma or its equivalent and was not given an ATB test. Although she completed the program, she was unable to obtain a job as a hair cutter, the field that Wilfred purported to train her for, because she was not adequately trained to cut hair and not prepared to pass the cosmetology license test. Mercado ultimately defaulted on the debt. She is not able to obtain an extension of credit, and the IRS seized her federal income tax refund to pay the debt. She never received any communication from the DOE informing her of the availability of a false certification discharge. Mercado applied to the DOE for a loan discharge on April 9, 2014, and her discharge was granted on June 9, 2014.
Plaintiff Ana Bernardez alleges that she inquired about a Wilfred educational program in 1988, and she was told that the only requirement for enrollment was a Social Security number, and that it would cost only a few hundred dollars. Bernardez did not have a high school diploma or its equivalent
In 1987, plaintiff Jeannette Poole gave her personal information to a representative of the Wilfred Academy, who said he would use it to determine if she qualified for loans to cover the cost of the program. Poole did not have a high school diploma or its equivalent and was not given an ATB test. After receiving information from the Wilfred representative, she told the representative that she did not want to enroll in the program or take out a loan. (She was homeless and sleeping in an abandoned building at the time and did not want to take on debt). Even though she never attended any Wilfred program, Wilfred took out two loans in her name without her knowledge. Because these loans went into default, Poole was unable to enroll in a business training program at a community college over a decade later. Further, her credit was impaired so she was not able to receive credit for necessities such as
Plaintiff Edna Villatoro enrolled in a Wilfred Academy in New Jersey. She did not have a high school diploma or its equivalent and was not given an ATB test. The Wilfred representative told Villatoro that the school offered GED classes, but a GED teacher was never provided. After completing the Wilfred program, Villatoro learned that to apply for a cosmetologist license in New Jersey she needed a high school diploma or its equivalent. She never obtained a license. The IRS seized her federal income tax refund. She never received any communication from the DOE informing her of the availability of a false certification discharge. Villatoro applied to the DOE for a loan discharge to the DOE on April 9, 2014, and her discharge was granted on June 17, 2014.
Plaintiff Lisa Bryant attended a Wilfred school in Houston, Texas in 1987. She did not have a high school diploma or its equivalent and was not given an ATB test. A Wilfred representative told Bryant that if she did not find a job
Plaintiff Cherryline Stevens enrolled in a Wilfred school in Queens, New York in 1987. Stevens did not have a high school diploma or its equivalent and was not given an ATB test. Although she completed the program, the school never gave her an official diploma, which is necessary to get a cosmetologist license. Approximately eight years ago, Stevens started working at Queens Village Day Care and the DOE garnished her wages to pay her student debt. She has also had her federal tax refund seized at least three times. She never received any communication from the DOE informing her of the availability of a false certification discharge. At the time the lawsuit was filed Stevens was continuing
B. The Class Allegations
Thе DOE estimates that over 61,300 student loans were given to individuals to attend Wilfred schools. Plaintiffs allege that their factual allegations are common to the class and that the claims of the named plaintiffs are typical of the claims of the class because Wilfred “routinely falsely certified students as eligible for federally guaranteed student loans even though the certified students did not have a valid high school diploma or GED, and Wilfred did not give them ability to benefit [] tests” and “certified that the students had taken and passed an approved ATB test when they had not.” JA 23 ¶¶ 66, 67.
All members of the putative class suffered harm because they paid money towards the debt; incurred interest, penalties and collection fees; had their federal income tax refunds seized and/or their wages garnished; and had their credit damaged. Plaintiffs also allege that “the majority of class members are, and have always been, unaware of the availability of a false certification discharge,” that “Defendant has or had information in his possession
In support of the motion for class certification, plaintiffs’ counsel avers that counsel spokе with fifty individuals whose eligibility for federally guaranteed students loans was falsely certified by ten different Wilfred schools, and that “[n]one of these individuals had been aware of the existence of the false certification discharge or that they were qualified for a false certification discharge of their federally guaranteed Wilfred loans until they were referred to [counsel], or until [counsel] advised them of it.” JA 54-55.
C. The DOE’s Investigation of Wilfred
The DOE began investigating Wilfred’s fraud as early as the 1980s. In 1982, the DOE found five Wilfred schools ineligible for continued participation in the federally guaranteed loan program. The DOE’s Office of Inspector General (“OIG”) investigated the financial aid practices of Wilfred’s schools in Massachusetts in 1983, Wilfred’s Florida schools in 1985, and Wilfred’s schools
In 1996 the DOE issued a report titled “Documentation of ATB violations,” based on OIG reports of approximately 50 Wilfred schools. JA 187. The report concluded that Wilfred’s “[c]onsistent pattern of gross violations of DOE regulations in multiple programs over multiple years indicates a strong resistance to following DOE regulations for administering funds and ATB student testing. Violations appeared system wide.” JA 188. The report recommended that “[s]ince the corporation was cited as early as June 1984 for
Due to these widespread findings of fraud in Wilfred schools, the DOE has a policy of “granting all facially valid [discharge] claims from Wilfred students.” JA 216 (Letter from Chad Keller, Supervisory Program & Mgmt. Analyst, Fed. Student Aid, U.S. Dep’t of Educ., to Jane Greengold Stevens, Dir. of Litig, N.Y. Legal Assistance Grp. (Feb. 18, 2014)); see JA 200 ¶ 16 (Declaration of Chad Keller). But with the exception of former students who attended the Philadelphia campus of Wilfred between July 1, 1987 and 1989, the DOE has refused to temporarily cease collection on federally guaranteed student loans attributable to Wilfred or to notify all students who attended Wilfred schools of their potential eligibility for a permanent discharge if the school falsely certified their ATB. See JA 216; JA 212-14 (Letter from Janet Greengold Stеvens, Dir. of Litig., N.Y. Legal Assistance Grp., to Arne Duncan, Sec’y of Educ., U.S. Dep’t of Educ. (Sept. 24, 2013)). The DOE has also continued to actively collect on loans made to former Wilfred students, including by seizing their income tax refunds, garnishing the wages, and tarnishing their credit.
Plaintiffs filed this action on behalf of themselves and similarly situated Wilfred borrowers, alleging that the DOE violated the APA by arbitrarily and capriciously refusing to suspend collection on the Wilfred loans and to notify Wilfred borrowers of their discharge application rights.6 Plaintiffs moved to certify a class of all individuals who obtained federal student loans to attend Wilfred after January 1, 1986, and whose ATB was falsely certified by Wilfred. The DOE opposed the motion and moved to dismiss, primarily on the grounds that the Secretary’s actions were unreviewable because they were “committed to agency discretion by law,”
Prior to oral argument, we asked plaintiffs to provide the current status of each of the named plaintiffs’ applications for false-certification discharge. Order, Salazar v. Duncan, No. 15-832 (2d Cir. Oct. 22, 2015), ECF No. 85.
DISCUSSION
We have jurisdiction to hear this appeal because plaintiffs’ claims come within the inherently transitory exception to the mootness doctrine. On the issues before us on appeal, we review the district court’s decision to dismiss the
I. The Plaintiffs Have Standing and the Case is Not Moot
To bring a claim under the APA a plaintiff must satisfy Article III’s standing requirements (constitutional standing) and assert interests that are arguably within the zone of interests to be protected or regulated by the statute she claims was violated (statutory standing), at all times during the litigatiоn (mootness). See Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 132 S. Ct. 2199, 2210 (2012); Nat’l Council of La Raza v. Gonzales, 468 F. Supp. 2d 429, 437 (E.D.N.Y. 2007), aff’d sub nom. Nat’l Council of La Raza v. Mukasey, 283 F. App’x 848 (2d Cir. 2008); Cook v. Colgate Univ., 992 F.2d 17, 19 (2d Cir. 1993).
However, even if a party has constitutional and statutory standing when her complaint is filed, her claim can become moot during the course of the litigation.
The parties disagree about whether the plaintiffs’ case is moot. The DOE granted all of the named plaintiffs’ requests to have their Wilfred loans discharged after the plaintiffs filed their complaint and amended complaint. Plaintiffs argue that their claims fall into the mootness exception for inherently transitory claims. The DOE disputes the applicability of the inherently transitory exception to these facts. We agree with the plaintiffs that this case falls into the
The exception to the mootness doctrine for “inherently transitory” claims asserted by the named plaintiff(s) in a class action allows such claims to “relate back” to the time of the filing of the complaint with class allegations. See Comer v. Cisneros, 37 F.3d 775, 799 (2d Cir. 1994). Under that exception, a case will not be moot, even if the controversy as to the named plaintiffs has been resolved, if: “(1) it is uncertain that a claim will remain live for any individual who could be named as a plaintiff long enough for a court to certify the class; and (2) there will be a constant class of persons suffering the deprivation complained of in the complaint.” Olson v. Brown, 594 F.3d 577, 582 (7th Cir. 2010), citing Gerstein v. Pugh, 420 U.S. 103, 110 n.11 (1975); Zurak v. Regan, 550 F.2d 86, 91–92 (2d Cir. 1977); see Sosna v. Iowa, 419 U.S. 393, 401–02 (1975).8
The plaintiffs’ claims are within the “inherently transitory” exception.
First, it is uncertain that a claim will remain live for any individual who could be
Second, there will be a constant class of persons suffering the deprivation complained of in the complaint. The DOE has stated that at least 61,300 FFEL program loans were issued to Wilfred students between 1986 and 1994. Although not all 61,300 Wilfred borrowers will be eligible for a discharge, as not every person who attended Wilfred did so based on a fraudulent certification of
The DOE argues that plaintiffs’ claims became moot because plaintiffs “took affirmative steps to procure a discharge of their loans,” not because of “the fleeting nature of the conduct giving rise to the claims,” and therefore their claims do not fall into the “inherently transitory” exception. Letter Br. for Defendant-Appellee at 2, Salazar v. Duncan, No. 15-832 (Oct. 30, 2015). The “inherently transitory” exception is not so limited.
As this court explained in Comer, “[n]ormally, the Court has held circumstances appropriate where the claims are so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.” 37 F.3d at 799 (internal quotation marks omitted). In Robidoux, we emphasized that the plaintiffs’ “claims are inherently transitory since the [Vermont] Department [of Social Welfare] will almost always be able to process a delayed [public assistance] application before a plaintiff can obtain relief through litigation.” 987 F.2d at 939.
The inherently transitory exception, which is properly focused on the time it will take for a court to review a claim а plaintiff has standing to pursue, does not require a plaintiff to forgo remedies to which she is entitled in order to seek broader remedies for the DOE’s alleged derelictions. If the plaintiffs’ allegations prove to be true, to accept the DOE’s position would acquiesce in conduct by which the DOE disregards the congressional command to notify victims of fraud and suspend collection activities when it is aware of such frauds, wait for the
II. The Presumption Favoring Judicial Review Applies
There is a strong presumption favoring judicial review of administrative action. Mach Mining, LLC v. EEOC, 135 S. Ct. 1645, 1651 (2015); Block v. Cmty. Nutrition Inst., 467 U.S. 340, 349 (1984). “From the beginning our cases have established that judicial review of a final agency action by an aggrieved person will not be cut off unless there is persuasive reason to believe that such was the purpose of Congress.” Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670 (1986) (internal alteration and quotation marks omitted). In the absence of an express statutory prohibition, the agency “bears the heavy burden of overcoming the strong presumption that Congress did not mean to prohibit all judicial review of [its] decision.” Dunlop v. Bachowski, 421 U.S. 560, 567 (1975). But the opposite presumption applies when a plaintiff seeks to require that an agency take an enforcement action because “an agency’s decisiоn not to prosecute or
The presumption in favor of judicial review applies to this case because plaintiffs challenge what they contend are unlawful actions that the agency has taken, and continues to take, against the plaintiffs themselves. Such challenges are at the core of the judicial review function. The presumption against judicial review of decisions not to take enforcement action protects agency discretion in allocating its resources to choose their enforcement targets. See id. Unlike the plaintiffs in Chaney, who asked the court to compel the FDA to take enforcement measures against third parties within the agency’s sphere of regulation, the plaintiffs here ask the court to review whether the DOE acted arbitrarily and capriciously in taking enforcement actions against plaintiffs. Plaintiffs would fall within Chaney if they were suing to compel the DOE to take action against Wilfred. They are not; the DOE and the Department of Justice have long since taken action to punish Wilfred. Plaintiffs demand that DOE stop acting to collect from them on the loans fraudulently obtained at their expense, as they contend that Congress required.
III. Congress Has Provided Sufficiently Clear Standards for Courts to Apply
The presumption in favor of judicial review is not absolute, but subject to a narrow exception: the APA’s prohibition against judicial review of agency action
To determine whether there is “law to apply” that provides “judicially manageable standards” for judging an agency’s exercise of discretion, the courts look to the statutory text, the agency’s regulations, and informal agency guidance that govern the agency’s challenged action. Westchester, 778 F.3d at 419; Chaney, 470 U.S. at 830. Agenсy regulations and guidance can provide a court with law to apply because, “[a]s the Supreme Court noted ‘where the rights of individuals are affected, it is incumbent upon agencies to follow their own procedures. This is so even where the internal procedures are possibly more rigorous than otherwise would be required.’” Montilla v. I.N.S., 926 F.2d 162, 167 (2d Cir. 1991) (internal alteration omitted), quoting Morton v. Ruiz, 415 U.S. 199, 235 (1974).
Even when a regulation’s adoption was not originally required by the statute, it can supply the law to apply.
Though the agency’s discretion is unfettered at the outset, if it announces and follows – by rule or by
I.N.S. v. Yueh-Shaio Yang, 519 U.S. 26, 32 (1996) (internal alteration omitted), quoting
In this case, upon review of the statute, regulations, and Dear Colleague Letters, we conclude there is sufficiеnt law to apply to permit judicial review of the plaintiffs’ claims under the APA. We begin with the statutory text. The statute governing false certification discharge provides that if a borrower received a federally guaranteed student loan and “if such student’s eligibility to borrow under this part was falsely certified by the eligible institution . . . then the
This mandatory, non-discretionary language creates boundaries and requirements for agency action and shows that Congress has not left the decision about the discharge of falsely certified student loans to the discretion of the agency. The text of the statute alone shows that Congress has mandated that the agency “shall” act in the specified circumstances.
Legislative history strongly supports our reading of the statute as a mandatory command to the agency, not a grant of unbridled discretion. Cf. Lawrence + Mem’l Hosp. v. Burwell, No. 15-164-CV, 2016 WL 423702, at *8 (2d Cir. Feb. 4, 2016) (relying on legislative history that supports the court’s interpretation of the statute’s plain meaning). Congress enacted the law requiring the discharge of debt based on a false certification in response to a report by the Senate Permanent Subcommittee on Investigations and OIG’s
S. Rep. No. 102-58, at 13, 33.
The Subcommittee found that fraud and abuse was able to thrive because “through gross mismanagement, ineptitude, and neglect in carrying out its regulatory and oversight functions, the Department of Education had all but abdicated its responsibility to the students it is supposed to service and the taxpayers whose interests it is charged with protecting.” Id. at 33. The report explained that, although similar issues have been called to the attention of the
[b]ecause the Department’s oversight systems have failed, students who have not received the education promised have been left responsible for loans that they cannot repay and, therefore, on which they all too often default. The Department must not only increase efforts to prevent this type of abuse in the future, but also work with students to ease financial burdens imposed as a result of past abuse.
Id. at 37 (emphasis added). The Subcommittee report, which was “strongly reflected in the provisions” of the bill that became the Higher Education Amendments of 1992, see S. Rep. No. 102-204, at 42, shows that Congress was deeply dissatisfied with the manner in which the DOE had failed to exercise its discretion.
Another bill to amend and extend the Higher Education Act of 1965, H.R. 3553, 102d Cong. (1992), was passed by the House, and was the basis for forming a conference committee with the Senate, which agreed to the bill that became the became the Higher Education Amendments of 1992, Pub. L. No. 102-325. See 138 Cong. Rec. 7300 (1992). The House Committee on Education and Labor issued a report on H.R. 3553, which, like the Senate Report on the Senate bill, expressed its intention that the discharge of falsely certified loans be mandatory. “[I]n a case
The context provided by the legislative history lends support to our conclusion that in requiring that the Secretary “shall” discharge a borrower’s liability on a student loan if the student’s eligibility to borrow was falsely certified,
Pursuant to the statute, the Secretary is obligated to promulgate regulations to fulfill the Congressional mandate that student loans obtained by false certification “shall” be discharged. See
Although the language in the regulations differs slightly depending on whether the loan was issued under the FFEL program or the Direct Loan
These regulations provide significant law for a court to apply in reviewing the agency action. From the regulations we learn that the DOE must take certain actions once the agency determines that the borrower “may” be eligible for a discharge, and that in deciding if a borrower “may be eligible,” the agency must consider information “it believes to be reliable,” including information available from guaranty agencies, the Secretary’s records, state authorities, and accrediting associations.11
But even when an agency has some discretion to make an initial decision, judicial review is not precluded if the plaintiffs can show that there is sufficient law to apply to the initial decision, so that a court can evaluate the agency’s exercise of its discretion in deciding if the initial triggering condition has been pertain to a group because they were enacted to allow discharge “without an application.” See
In this case, the agency’s determination that a borrower “may be eligible for a discharge” triggers its mandatory obligations to suspend collection and notify borrowers.
Dear Colleague Letters (“DCLs”), issued by the DOE, instruct guaranty agencies and the DOE concerning what evidence to consider when evaluating an application for discharge. One particularly relevant DCL is dedicated to “Loan
[i]n evaluating an application for discharge, a guaranty agency [or the DOE] must consider . . . evidence about the testing and admission practices of the school, and inferences that can reasonably be drawn from that . . . evidence.
. . . [S]upporting evidence can include a finding by an entity or organization that had oversight responsibility over the school’s SFA administration or educational programs, statements or admissions by school officials with knowledge of the school’s practices, or statements made by other students who attended the school that are both sufficiently detailed and consistent with each other to appear reliable. Those statements can include statements made in other claims for discharge relief.
The Department expects a guaranty agency [or the DOE] to obtain existing documentation available from any public or private agency that reviewed or had oversight responsibility for the school.
credible evidence of the following provides an adequate basis for granting a discharge application . . . : (i) withdrawal rates exceeding 33 percent at the school at the relevant time, or (ii) . . . an annual loan default rate exceeding [a particular percentage, depending on the year the student entered repayment on her loans].
DCL 07-09, at 3.
Using the guidance provided by the regulations and DCLs, in the context of the mandatory language of the statute, a court has sufficient law to apply to evaluate whether the agency has been arbitrary and capricious in deciding whether there is “reliable information” that a borrower or borrowers “may be eligible for a discharge,” and thus whether the DOE’s mandatory obligation to suspend collection and send notice has been triggered. That type of evaluation is squarely within the competence of the judiciary. As thе Ninth Circuit has explained, the term “‘reliable’ . . . does not defy meaningful review . . . [and does not] involve[] a complicated balancing of a number of factors that are so
The regulations and DCLs provide additional guidance by directing the court to the factors and records the guaranty agencies and the DOE rely on in making the triggering determination. The regulations enumerate some factors that the guaranty agencies and the DOE must consider when evaluating discharge applications, including information available from the records of the DOE, guaranty agencies, state authorities, and accrediting associations. And the DCLs provide guidance about other kinds of evidence the DOE requires to be considered both by the guaranty agencies and by the DOE in determining eligibility for discharge, including: testing and admission practices of the school, any findings by an entity or organization that had oversight responsibility, statements or admissions by school officials or students, evidence of withdrawal rates, and loan default rates. See DCL 95-42; DCL 07-09.
The actions the agency has already taken are also relevant to a court’s determination of whether the agency acted arbitrarily in not finding the initial triggering condition met. An agency’s “irrational departure” from its practice or policy can violate the APA. Yueh-Shaio Yang, 519 U.S. at 32. That factor may be
IV. The Challenged Action of the DOE is Final
To determine whether the challenged agency action is reviewable under the APA we must also decide whether the action is “final.” The APA makes a “final agency action for which there is no other adequate remedy in a court . . . subject to judicial review.”
Bennett v. Spear, 520 U.S. 154, 177–78 (1997) (citations and internal quotation marks omitted).13 For the second prong, the “core question” is “whether the result of [the agency’s decisionmaking] process is one that will directly affect the parties.” Sharkey, 541 F.3d at 88. The Supreme Court has interpreted the finality element in a “pragmatic way.” Id.; see also Paskar v. U.S. Dep’t of Transp., 714 F.3d 90, 97–98 (2d Cir. 2013) (considering the “substantial practical impact” of an agency’s letter in deciding if it was a final agency decision).
The second requirement of the Bennett test is also met, because legal consequences flow from the DOE’s decision not to suspend the collection of the loans of the putative class members. The borrowers during the time of the suspension would not have the legal obligation to make payments and the DOE could not garnish wages or direct tax refund offsets. The fact that the suspension is temporary does not undermine the fact that the decision to suspend or not to suspend is a final agency action because the action “had an immediate and substantial impact upon the complaining party.” Aquavella v. Richardson, 437 F.2d 397, 403–404 (2d Cir. 1971) (concluding that the suspension of Medicare payments was final agency action). Further, suspending the repayment of loans of Wilfred borrowers who may be eligible would also have legal consequences for the DOE, which otherwise has the non-discretionary mandate to collect on federal student loans. See
The decision that the agency is not required to send notice also has a “substantial practical impact.” Paskar, 714 F.3d at 97. Without notice, plaintiffs plausibly allege, it is likely that most of the at least 61,300 Wilfred borrowers will continue to be unaware that they can apply to the DOE for a discharge and not know of the conditions under which the DOE will grant the request. Indeed, the DOE’s own rulemaking acknowledged this reality when it cited the fact that “many [borrowers] may be unaware of the possibility of receiving a loan discharge” as a reason for the implementation of a group discharge regulation. 65 Fed. Reg. 46,318. That acknowledgment, along with the plaintiffs’ allegations, which we must accept as true, belie the DOE’s contention that because some
We recognize that even if the DOE is required to suspend collection and send notice to putаtive class members, further proceedings in the agency on related issues will be required before the DOE will discharge any individual’s loan obligation. See
Here, even if plaintiffs were granted the relief they seek, there is the possibility of further proceedings in the agency because the agency would have to process applications of individuals who apply for a discharge, unless the agency were to use its discretion to grant a group discharge. Plaintiffs, however, do not seek to require the DOE to grant discharges, or contend that all members of their proposed class are entitled to such discharge. All they claim is a right to notice and suspension as provided by statute. As to that claim, the DOE’s decision not to afford such notice and suspension is final. Because the two requirements of the Bеnnett test are met, and judicial review would not disrupt any ongoing administrative process, the agency action is final, and thus reviewable under the APA.
For the foregoing reasons the judgment of the district court dismissing plaintiffs’ complaint is VACATED and the case is REMANDED for further proceedings consistent with this opinion, including consideration of plaintiffs’ class certification motion.