United States District Court, N.D. California
THERESA SWEET, CHENELLE ARCHIBALD, DANIEL DEEGAN, SAMUEL HOOD, TRESA APODACA, ALICIA DAVIS, and JESSICA JACOBSON, individually and on behalf of all others similarly situated, Plaintiffs,
ELISABETH DEVOS, in her official capacity as Secretary of the United States Department of Education, and THE UNITED STATES DEPARTMENT OF EDUCATION, Defendants.
ORDER GRANTING MOTION FOR CLASS
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE
putative class action arising under the Higher Education Act
and the APA, plaintiffs move for class certification. For the
reasons stated below, the motion is Granted.
for-profit colleges have left numerous students saddled with
debt. Certain of these schools used fraudulent tactics to
enroll students, such as inflating job placement numbers.
Members of the instant putative class - including plaintiffs
Theresa Sweet, Chenelle Archibald, Daniel Deegan, Samuel
Hood, Tresa Apodaca, Alicia Davis, and Jessica Jacobson -
sought to cancel their federal student loans with defendant
United States Department of Education under the
“borrower defense” rule, which allows defrauded
students to apply for loan forgiveness based on their
allege that since June 2018, the Department has arbitrarily
and capriciously stonewalled (and continues to stonewall) the
relief process with its “blanket refusal” to
process their borrower claims. In June 2019, they brought the
instant putative class action, seeking to compel the
Department to at least begin deciding applications again.
Plaintiffs fired the opening salvo soon thereafter with the
instant motion for class certification. Most of the
underlying facts were developed on briefing for the instant
motion and are briefly summarized herein.
Borrower Defense Regulatory Scheme.
IV of the Higher Education Act of 1965, 20 U.S.C. § 1070
et seq., authorizes the Secretary of Education
“to assist in making available the benefits of
postsecondary education to eligible students” through
financial-assistance programs. See id. §§
1070(a), 1071(a)(1). These loan programs include the William
D. Ford Federal Direct Loan Program (“Direct Loan
Program”), which allows students attending
“participating institutions of higher education”
to secure direct loans from the federal government, and the
Federal Family Education Loan (“FFEL”) Program,
which allows the Department to reinsure guaranteed loans made
to students by financial institutions. Id.
§§ 1078, 1087a.
allows the Department to cancel a student federal loan
repayment based on a school's misconduct. In implementing
the Direct Loan Program, the Secretary “shall specify
in regulations which acts or omissions of an institution of
higher education a borrower may assert as a defense to
repayment of a loan under this part.” 20 U.S.C. §
1087e(h). The FFEL Program, which has been ineffective since
2010, had already provided for borrower defense claims (Dkt.
No. 20-13 at 4).
January 1994, the Secretary promulgated regulations setting
forth the first variation of the “borrower
defense” rule for direct loans - later amended in
December 1994 and effective 1995 - which allowed a borrower
to “assert as a defense against repayment of his or her
loan ‘any act or omission of the school attended by the
[borrower] that would give rise to a cause of action against
the school under applicable State law.' ” 60 Fed.
Reg. 37, 768, 37, 770 (July 21, 1995) (quoting 34 C.F.R.
§ 685.206(c) (1995)). This standard still applies to all
loans “first disbursed prior to July 1, 2017.” 34
C.F.R. § 685.206 (2018).
2015, Corinthian Colleges, Inc. (“Corinthian”) -
“a publicly traded company [that] operat[ed] numerous
postsecondary schools that enrolled over 70, 000 students at
more than 100 campuses nationwide” - collapsed. 81 Fed.
Reg. 39, 330, 39, 335 (June 16, 2016). In the wake of
Corinthian's bankruptcy filing and the Department's
finding “that the college had misrepresented its job
placement rates, ” Corinthian students submitted a
“flood of borrower defense claims.” Id.
at 39, 330, 39, 335.
response to the heightened demand, the Department began
creating a streamlined process and infrastructure for
adjudicating the borrower defense claims. In June 2015, the
Department appointed a special master “to create and
oversee a process to provide debt relief for these Corinthian
borrowers” and created a “Borrower Defense
Unit” to handle those claims (Dkt. No. 20-15 at 7). 81
Fed. Reg. at 39, 335. In November 2016, it promulgated new
borrower defense regulations - scheduled to take effect on
July 1, 2017 - to codify the process for adjudication and to
set a new standard for borrower defense claims. See
34 C.F.R. §§ 685.206, 685.222 (2018). The
regulations required a borrower to submit an application with
evidence supporting his or her claim and allowed the
Secretary to designate an official to resolve the claim.
Id. § 685.222(e).
2017, the Department created a Borrower Defense Review Panel
to examine the Department's borrower defense process and
make recommendations on how to address pending claims going
forward. That panel “decided to honor approximately 16,
000 borrower defense claim approvals made, but not
effectuated, prior to January 20, 2017” (Compl.
¶¶ 164-65; Dkt. No. 20-15 at 33).
before the 2016 regulations' effective date (July 1,
2017), the Department stayed the regulations under Section
705 of the APA, which delay another federal court found
arbitrary and capricious in September 2018. Bauer v.
DeVos, 325 F.Supp.3d 74, 110 (D.D.C. 2018) (Judge
Randolph Moss). In May 2018, yet another federal court in
this district preliminarily enjoined the Department's use
of its new “partial relief methodology, ” which
methodology provided for, in some cases, less than full
discharges depending on the level of harm suffered by
borrowers at particular Corinthian programs (Dkt. No. 38 at
5). Calvillo Manriquez v. Devos, 345 F.Supp.3d 1077
(N.D. Cal. 2018) (Magistrate Judge Sallie Kim). The appeal of
this preliminary injunction is currently pending before our
court of appeals.
The Instant Action.
continue to seek to cancel their student loans. Yet the
Department has not decided a borrower defense claim since
June 2018. Plaintiffs are former students of for-profit
schools who have asserted borrower defense claims as early as
2015. They allege that the Department's inaction
continues to cause putative class members ongoing harm
(Compl. ¶¶ 181, 187, 205-35).
example, plaintiff Theresa Sweet graduated from the Brooks
Institute of Photography (“Brooks”), a for-profit
school offering programs in the visual arts, in 2006. Brooks
represented to her that “80-90% of graduates got
employed immediately after graduating”; “promised
that they would help [her] get a job from ‘faculty
networking' or from the job placement assistance
office”; and “promised that Brooks credits would
transfer to other colleges and universities.” Sweet
borrowed about $46, 107 in FFEL loans (and over $140, 000 in
private loans). Investigations eventually revealed that
Brooks had violated state law, such as misrepresenting
students' post-graduation income. Brooks shut down in
August 2016. Sweet now works in a hospital as a certified
nurse's assistant. She has never held a job that used her
Brooks education. She could not transfer her credits from
Brooks to other colleges or universities. Sweet asserted her
borrower defense to the Department in the fall of 2016. The
Department has yet to act on her application. Meanwhile, the
interest on her loans continues to grow, with her federal
loans now at $65, 000. The debt has affected her credit,
which in turn has affected her career prospects, and other
aspects of her life (id. ¶¶ 237-39,
244-54; Dkt. No. 20-2 ¶¶ 5-6).
2019, plaintiffs filed the instant putative class action,
alleging that the Department “refuses to grant or
deny” any of the over 158, 000 pending borrower defense
applications as a matter of policy. They assert a single
claim under Section 706(1) of the APA under the theory that
the Department's inaction constituted unlawfully withheld
and unreasonably delayed agency action. They seek injunctive
relief compelling the Department to begin deciding borrower
defense claims again. That is, they seek to “escape
this limbo” and simply want a decision - whether an
approval or denial - on their applications (Compl.
¶¶ 187, 377-89; Dkt. No. 20 at 2).
now move to represent other borrower defense claimants and
certify the following class pursuant to Federal Rules ...