Bauer v. Devos

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

MEAGHAN BAUER, et al.,

Plaintiffs,

v.
Civil Action No. 17-1330 (RDM)
ELISABETH DeVOS, Secretary, U.S.
Department of Education, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

Having concluded that the Department of Education’s various actions delaying the

Borrower Defense Regulations violated the Administrative Procedure Act (“APA”), 5 U.S.C.

§ 701 et seq., the Court turns to the issue of the appropriate remedy. The Court concludes that,

as with most unlawful agency actions, the proper remedy here is vacatur. The Court will,

accordingly, vacate the “Final Delay Rule,” William D. Ford Federal Direct Loan Program, 83

Fed. Reg. 6,458 (Feb. 14, 2018). The Court will also vacate the “Section 705 Stay,” William D.

Ford Federal Direct Loan Program, 82 Fed. Reg. 27,621 (June 16, 2017), but will stay that

vacatur for 30 days from the date of issuance of the Court’s original opinion, Bauer v. DeVos,

No. 17-1330, 2018 WL 4353656 (D.D.C. Sept. 12, 2018)—that is, until October 12, 2018 at 5:00

p.m., to allow the Department to attempt to remedy the deficiencies identified in the Court’s

original opinion.

I. BACKGROUND

On November 1, 2016, the Department of Education promulgated the Borrower Defense

Regulations, a package of regulatory changes to federal student loan programs that was to
become effective on July 1, 2017. William D. Ford Federal Direct Loan Program (“Borrower

Defense Regulations”), 81 Fed. Reg. 75,926 (Nov. 1, 2016). Shortly before the effective date,

the California Association of Private Postsecondary Schools (“CAPPS”) brought suit challenging

the regulations, and, on June 2, 2017, CAPPS sought a preliminary injunction blocking the

implementation of two aspects of the new rules. Dkt. 1, Dkt. 6, CAPPS v. DeVos, Civ. No. 17-

999 (D.D.C.). But that motion was never fully briefed or decided because the Department, on its

own accord, issued a stay under § 705 of the APA, postponing not only the effective date of the

two changes that CAPPS had asked the Court preliminarily to enjoin, but most of the other

portions of the new regulations as well. Section 705 Stay, 82 Fed. Reg. at 27,621. Separately,

the Department issued an interim final rule on October 24, 2017, that delayed the effective date

of the Borrower Defense Regulations to July 1, 2018. William D. Ford Federal Direct Loan

Program (“Interim Final Rule”), 82 Fed. Reg. 49,114 (Oct. 24, 2017). That same day, the

Department also issued a notice of proposed rulemaking (“NPRM”) to further delay the effective

date to July 1, 2019. William D. Ford Federal Direct Loan Program (“October 24, 2017

NPRM”), 82 Fed. Reg. 49,155 (Oct. 24, 2017). Then, on February 14, 2018, the Department

issued a final rule delaying the effective date of the Borrower Defense Regulations until July 1,

2019. Final Delay Rule, 83 Fed. Reg. at 6,458.

In its earlier opinion, the Court held that the Final Delay Rule and Section 705 Stay were

both unlawful. See Bauer, 2018 WL 4353656, at *1. With respect to the Final Delay Rule, the

Court held that the Department failed to comply with the procedures prescribed by the Higher

Education Act (“HEA”), 20 U.S.C. § 1070 et seq. In particular, the Court held that the

Department’s decision to dispense with the negotiated rulemaking procedures that generally

apply in Title IV rulemakings, see 20 U.S.C. § 1098a(a), was not supported by a reasoned

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invocation of the “good cause” exception, see Bauer, 2018 WL 4353656, at *14–18. With

respect to the Section 705 Stay, the Court held that the stay was arbitrary and capricious. See id.

at *25. As the Court explained, the Department had stayed the Borrower Defense Regulations

pending the resolution of the CAPPS litigation on three grounds: the CAPPS litigation raised

“serious questions” about the validity of the Borrower Defense Regulations; the delay would not

cause the government any significant harm; and the Department was, in any event, reconsidering

the regulations, and the delay would minimize confusion while that process proceeded. Id. at

*22 (citing Section 705 Stay, 82 Fed. Reg. at 27,621). The Court concluded that none of the

reasons withstood APA scrutiny. Id. The first rationale was “unsupported by any analysis” and

“was at odds with the Department’s prior [and unacknowledged] conclusion to the contrary.” Id.

The second and third rationales also lacked “any meaningful analysis” and were “beyond the

scope of the § 705 considerations” because they were “unrelated to the pending CAPPS case.”

Id.

II. LEGAL STANDARD

“[W]hen a reviewing court determines that agency regulations are unlawful, the ordinary

result is that the rules are vacated . . . .” NAACP v. Trump, 298 F. Supp. 3d 209, 243 (D.D.C.

2018) (quoting Harmon v. Thornburgh, 878 F.2d 484, 495 n.21 (D.C. Cir. 1989)). That rule,

however, is not absolute, and a remand without vacatur may be “appropriate [if] ‘there is at least

a serious possibility that the [agency] will be able to substantiate its decision’ given an

opportunity to do so, and when vacating would be ‘disruptive.’” Radio-Television News

Director Ass’n v. FCC, 184 F.3d 872, 888 (D.C. Cir. 1999) (quoting Allied-Signal, Inc. v. U.S.

Nuclear Regulatory Comm’n, 988 F.2d 146, 151 (D.C. Cir. 1993)). In some circumstances,

moreover, a combined approach is warranted; the Court may vacate the invalid rule but stay “its

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order of vacatur for a limited time to allow the agency to attempt to cure defects that the court

has identified.” NAACP v. Trump, 298 F. Supp. 3d at 244 (staying vacatur for 90 days so agency

could provide more fulsome explanation for rescission of DACA); see also, e.g., Nat. Res. Def.

Council, Inc. v. EPA, 301 F. Supp. 3d 133, 145 (D.D.C. 2018) (staying vacatur of rule governing

pollution level in Anacostia River until agency promulgated replacement rule). Such a combined

approach falls within the Court’s remedial discretion. See Friends of the Earth, Inc. v. EPA, 446

F.3d 140, 142, 148 (remanding to district court to vacate agency rule, but noting that the district

court had “remedial discretion . . . to stay [its] order on remand”); Ronald M. Levin, “Vacation”

at Sea: Judicial Remedies and Equitable Discretion in Administrative Law, 53 Duke L.J. 291,

324–25 (2003) (“[T]he criteria that judges use to determine whether to order a stay have evolved,

and variations on those criteria have emerged in specific contexts, but the APA drafters’ core

premise that they were conferring an equitable power has not been controversial.” (footnotes

omitted)); Patricia M. Wald, Judicial Review in Midpassage: The Uneasy Partnership Between

Courts and Agencies Plays On, 32 Tulsa L.J. 221, 236 (1996) (“[T]here are inherent powers in a

reviewing court to postpone vacation until the agency has a chance to make things right.”); cf.

Buckley v. Valeo, 424 U.S. 1, 143 (1976) (staying judgment for 30 days to “afford Congress an

opportunity to reconstitute the [FEC] by law or to adopt other valid enforcement

mechanisms . . . .”). Vacatur with a brief stay may be warranted, for example, where the Allied-

Signal factors are satisfied, but where a prolonged agency remand threatens to deprive one or

more parties of significant rights. See NAACP v. Trump, 298 F. Supp. 3d at 245.

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 III. ANALYSIS

A. February 14, 2018 Final Delay Rule

All parties are in accord—or at least do not contest—that vacatur is the appropriate

remedy with respect to the Final Delay Rule, which was promogulated without observance of the

proper procedures under the HEA. At the September 14, 2018 hearing, the Department stated

that, “to the extent [the Court] feels that vacatur is appropriate . . . [the Department] is not

prepared . . . to oppose that.” Dkt. 90 at 55. Moreover, as the Court has previously noted, the

Department declined to address this issue in opposing Plaintiffs’ motion for summary judgment.

See Dkt. 58-1 at 79–80 n.28. Accordingly, the Court will vacate the Final Delay Rule.

B. Section 705 Stay

Plaintiffs and the Department disagree, however, as to the appropriate remedy with

respect to the Section 705 Stay. Plaintiffs ask the Court to vacate the stay and to allow the

Borrower Defense Regulations to take effect immediately. Dkt. 55-1 at 79; Dkt. 56 at 72. In the

alternative, they ask the Court to allow the Borrower Defense Regulations to take immediate

effect, but, if necessary, to issue a temporary restraining order (“TRO”) in CAPPS, Civ. No. 17-

999, staying the provision prohibiting predispute arbitration agreements and class action

waivers—the only provision that CAPPS had previously sought to enjoin. Dkt. 90 at 48. The

Department counters that the appropriate remedy is remand without vacatur, or, in the

alternative, to “stay any implementation pending the [preliminary injunction] briefing” in

CAPPS, Civ. No. 17-999. Id. at 41. The Department also represented that, in the event the Court

orders the Borrower Defense Regulations to take immediate effect, the Department requires at

least 60 days to implement the regulations. Id. at 56.

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 As an initial matter, the Court declines to adopt Plaintiffs’ second suggestion. The Court

cannot sua sponte issue a TRO in CAPPS, Civ. No. 17-999, when CAPPS itself has not requested

one. The Court, accordingly, turns to the Allied-Signal factors to analyze whether remand

without vacatur is appropriate.

The first consideration—whether the Department could substantiate the Section 705 Stay

on remand—presents a close call. The Department could, “in theory,” cure the deficiencies

identified in the Court’s earlier opinion, but it “may face practical obstacles when attempting to

remedy them.” NAACP v. Trump, 298 F. Supp. 3d at 244. To begin, given the incongruency

between the scope of the Section 705 Stay (which covers 22 provisions) and the scope of relief

sought in the motion for a preliminary injunction that CAPPS filed and then withdrew, see

Bauer, 2018 WL 4353656, at *23, the Department may not be able to justify the full breadth of

the Section 705 Stay. The Department would also need to explain why it believes CAPPS has

raised serious questions about the lawfulness of the Borrower Defense Regulations; why it no

longer ascribes to the view that the prohibition of predistpute arbitration agreements and class

action waivers is lawful, as it had previously stated, see Borrower Defense Regulations, 81 Fed.

Reg. at 76,021–24; and how that conclusion relates to other provisions of the Borrower Defense

Regulations. Nevertheless, because there is a “nontrivial likelihood” that the Department could

justify the Section 705 Stay on remand, NAACP v. Trump, 298 F. Supp. 3d at 244 (quoting

WorldCom, Inc. v. FCC, 288 F.3d 429, 434 (D.C. Cir. 2002)), the first Allied-Signal factor

weighs (slightly) in favor of remand without vacatur.

The second Allied-Signal factor—the risk of disruption—also tips in favor of remand

without vacatur. In light of the CAPPS litigation, which is now unstayed, and the CAPPS

plaintiff’s entitlement to be heard on the merits of its preliminary injunction, the Court concludes

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that vacating the Section 705 Stay, and allowing the Borrower Defense Regulations to take

immediate effect, could result in an “interim change” that “may itself be changed.” Id. at 245

(quoting Allied-Signal, 988 F.2d at 150–51). If the Court were, for example, to vacate the

Section 705 Stay, and then conclude that CAPPS is entitled to preliminary relief, the Borrower

Defense Regulations might take effect this week, only to be enjoined, at least in part, two or

three weeks later. Without any advance notice and opportunity to prepare, such an abrupt

change would cause regulatory vertigo. As such, the threat of disruption also weighs in favor of

remand without immediate vacatur, at least for a few weeks.

Because this case is about the consequences of delay, however, the Court is mindful that,

in crafting the appropriate remedy, time is of the essence. The further delay that would result

from remanding the Section 705 Stay to the Department for further explanation without vacatur

risks depriving Plaintiffs of meaningful relief. Accordingly, the Court will chart an intermediate

course: the Court will vacate the Section 705 Stay, but stay the vacatur for 30 days from the date

of its opinion declaring the Section 705 Stay unlawful. This will allow the Department to

attempt to remedy the deficiencies in the Section 705 Stay while the CAPPS litigation proceeds

in an expeditious manner; it will also curtail the harm to student borrowers that a remand without

vacatur would otherwise engender.

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 CONCLUSION

It is hereby ORDERED that the Final Delay Rule, 83 Fed. Reg. 6,458, shall be

immediately VACATED. It is further ORDERED that the Section 705 Stay, 82 Fed. Reg.

27,621, shall be VACATED, but the vacatur shall be STAYED until October 12, 2018 at 5:00

p.m.

SO ORDERED.

/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge

Date: September 17, 2017

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