Adams v. Duncan

179 F. Supp. 3d 632, 2016 U.S. Dist. LEXIS 43710, 2016 WL 1270261
CourtDistrict Court, S.D. West Virginia
DecidedMarch 31, 2016
DocketCIVIL ACTION NO. 3:15-3592
StatusPublished
Cited by4 cases

This text of 179 F. Supp. 3d 632 (Adams v. Duncan) is published on Counsel Stack Legal Research, covering District Court, S.D. West Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adams v. Duncan, 179 F. Supp. 3d 632, 2016 U.S. Dist. LEXIS 43710, 2016 WL 1270261 (S.D.W. Va. 2016).

Opinion

MEMORANDUM OPINION AND ORDER

ROBERT 0. CHAMBERS, CHIEF JUDGE

Pending is a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction brought by Defendant Arne Duncan, Secretary of the United States Department of Education. (“Secretary”); ECF No. 8. The Secretary claims the Court lacks subject matter jurisdiction over this action because the United States has not waived sovereign immunity as to the injunctive relief Plaintiff Karen Adams seeks, and because Ms. Adams’s claim is mooted. Ms. Adams’s action arises from the United States Department of Education’s (“Department”) decision to rehabilitate and sell loans Ms. Adams and thousands of others obtained to attend a for-profit school under the Guaranteed Student Loan Program, now known as the Federal Family Education Loan (“FFEL”) Program, Prior to rehabilitating and selling Ms. Adams’s FFEL loan, the Secretary had found.it and other FFEL loans suitable for discharge due to the school having falsely certified its students’ eligibility for FFEL loans. Ms. Adams’s asks the Court to overturn the Secretary’s decision to rehabilitate and sell group discharged FFEL loans, and the decision, in Ms. Adams’s case specifically, to refund no interest on money she paid under her discharged FFEL loan. Finding subject matter jurisdiction over Ms. Adams’s claims under the Administrative Procedure Act (“APA”), 5 U.S.C. § 701, et [635]*635seq., and no mootness, the Court DENIES the Secretary’s motion.

I. Background

The facts relevant to deciding this motion to dismiss are detailed below in a light most favorable to Ms. Adams. First, some background on the FFEL Program is in order.

A.. Federal Family Education Loan Program.

The federal student loan program formerly known as the Guaranteed Student Loan Program, now known as the FFEL Program,1 was authorized by Congress under Part B of the Higher Education Act of 1965, as amended, 20 U.S.C. §§ 1070, et seq. (“HEA”). The HEA was enacted in an effort to address the growing need for financial assistance for students in higher education. Tipton v. Sec’y of Educ. of U.S., 768 F.Supp. 540, 545 (S.D.W.Va.1991). Under the FFEL Program, qualifying students who attended eligible postsecondary education institutions could obtain loans from participating lenders to finance their education. 20 U.S.C. §§ 1078(b)-(c), Repayment of the loans is insured by state or non-profit guaranty agencies, which in turn are reinsured by the Department of Education. The Department has promulgated regulations for the FFEL program under its HEA rulemaking authority.

Under the Department’s regulations, if a borrower fails to repay the loan as scheduled, the lender must attempt to collect the loan using certain procedures. 34 C.F.R. § 682.411. If the lender’s collection efforts are unsuccessful, the loan is considered in default and the lender presents to the guaranty agency a claim for repayment of the loan. The guaranty agency then pays the lender for the loan and receives reimbursement from the Department. 34 C.F.R. § 682.406. However, the guaranty agency is also required to undertake collection efforts. 34 C.F.R. § 682.410(b)(6). If the guaranty agency’s collection efforts are unsuccessful, the guaranty agency eventually assigns the loan to the Department, and the Department undertakes its own collection efforts. 34 C.F.R. § 682.409. The required collection activities by the lender and the guaranty agency are called “due diligence,” and the lender and guaranty agency must meet the due diligence requirements in order to receive reimbursement from the Department. 34 C.F.R. § 682.406.

A borrower who has defaulted on a FFEL loan may “rehabilitate” the defaulted loan by making a certain number of qualifying on-time payments within a specific period. 20 U.S.C. § 1078-6(a); 34 C.F.R, § 682.405. If a FFEL loan is rehabilitated, the borrower recommits to paying the loan under the promissory note and receives significant benefits for no longer being in default, including having the default removed from the borrower’s credit history.

The HEA and Higher Education Act Amendments of 1992 (“1992 HEA Amendments”) also permit discharge of FFEL loans under certain conditions. The 1992 HEA Amendments provide that if a student borrower’s “eligibility to borrow ... was falsely certified by the eligible institution ... then the Secretary shall discharge the borrower’s liability on the loan (including interest and collection fees) by repaying the amount owed on the loan.” 20 U.S.C. ■ § 1087(c)(1); Gill v. Paige, 226 F.Supp.2d 366, 369 (E.D.N.Y.2002). Under Department regulations, an institution [636]*636falsely certifies a student’s eligibility if the institution: (1) certified the student’s ability to benefit (“ATB”) from the institution’s training when the student did not meet the applicable statutory and regulatory requirements; (2) signed the borrower’s name without authoi’ization on the loan application or promissory note; or (3) certified the student’s eligibility for the loan as a result of the crime of identity theft. 34 C.F.R. § 682.402(e)(l)(i).

To qualify for a discharge, Department regulations generally require a borrower to file an application and provide certain information and records to demonstrate that he or she meets the requirements for a discharge. 34 C.F.R. § 682.402(e)(3); see also Salazar v. Duncan, No. 14-1230, 2015 WL 252078, at *4 (S.D.N.Y. Jan. 16, 2015).2 However, a borrower’s loan may be discharged without an application if the Secretary determines that the borrower qualifies for a discharge based on information in the Secretary’s possession. 34 C.F.R. § 682.402(e)(15). This latter option is known as a “group” or “blanket” discharge. Reviewing the Department regulations, the effect of a group discharge under (e)(15) is the same as when an individual borrower obtains discharge by filing an application under other sections of 682.402(e).3

After discharging a FFEL loan held by the Department, the Secretary is obligated by Department regulations to take several actions. First, the Secretary must reimburse the borrower amounts he or she paid voluntarily or through enforced collection on the discharged loan.

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179 F. Supp. 3d 632, 2016 U.S. Dist. LEXIS 43710, 2016 WL 1270261, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adams-v-duncan-wvsd-2016.