Student Loan Servicing Alliance v. Dist. of Columbia
Opinion
PAUL L. FRIEDMAN, United States District Judge
This case involves the important question of whether the District of Columbia - and inferentially other states - may require student loan servicers who manage federally-owned and federally-guaranteed student loans to obtain a license to operate in the District of Columbia in an effort to protect the consumers of those loans. Plaintiff Student Loan Servicing Alliance ("SLSA") maintains that the District of Columbia may not regulate such servicers because Congress has preempted the field of regulating student loans servicers or has otherwise preempted the law at issue - D.C. Law 21-214 and the Final Rules. SLSA's position is supported by the United States, which has filed a statement of interest in this case.
Defendants - the District of Columbia; Stephen C. Taylor, Commissioner, Department of Insurance, Securities, and Banking; and Charles A. Burt, Student Loan and Foreclosure Ombudsman - have moved [Dkt. No. 21] to dismiss SLSA's amended complaint or, in the alternative, *37for summary judgment. SLSA filed a cross-motion [Dkt. No. 27] for summary judgment. Upon careful consideration of the parties' papers, the relevant legal authorities, the oral arguments of counsel at a motions hearing on October 23, 2018, and the entire record in this case, the Court will deny defendants' motion to dismiss; grant defendants' motion for summary judgment in part; and grant in part and deny in part plaintiff's motion for summary judgment.1
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Higher Education Act
Congress passed the Higher Education Act of 1965 ("HEA"),
The two student loan programs at issue in this case are the William D. Ford Federal Direct Loan Program ("FDLP"),
*38The FFELP, originally known as the Guaranteed Student Loan Program, was first created in 1965 as part of the HEA. See Am. Compl. ¶ 26. Later, the FDLP was fully authorized pursuant to the Student Loan Reform Act of 1993 as part of the Omnibus Reconciliation Act of 1993. See ibr.US_Case_Law.Schema.Case_Body:v1">id
FFELP loans were originally issued by private lenders and insured by guaranty agencies, and the federal government reinsured the loans. See
The types of federal student loans created by the HEA, therefore, can be grouped into three different categories for purposes of this lawsuit.
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PAUL L. FRIEDMAN, United States District Judge
This case involves the important question of whether the District of Columbia - and inferentially other states - may require student loan servicers who manage federally-owned and federally-guaranteed student loans to obtain a license to operate in the District of Columbia in an effort to protect the consumers of those loans. Plaintiff Student Loan Servicing Alliance ("SLSA") maintains that the District of Columbia may not regulate such servicers because Congress has preempted the field of regulating student loans servicers or has otherwise preempted the law at issue - D.C. Law 21-214 and the Final Rules. SLSA's position is supported by the United States, which has filed a statement of interest in this case.
Defendants - the District of Columbia; Stephen C. Taylor, Commissioner, Department of Insurance, Securities, and Banking; and Charles A. Burt, Student Loan and Foreclosure Ombudsman - have moved [Dkt. No. 21] to dismiss SLSA's amended complaint or, in the alternative, *37for summary judgment. SLSA filed a cross-motion [Dkt. No. 27] for summary judgment. Upon careful consideration of the parties' papers, the relevant legal authorities, the oral arguments of counsel at a motions hearing on October 23, 2018, and the entire record in this case, the Court will deny defendants' motion to dismiss; grant defendants' motion for summary judgment in part; and grant in part and deny in part plaintiff's motion for summary judgment.1
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Higher Education Act
Congress passed the Higher Education Act of 1965 ("HEA"),
The two student loan programs at issue in this case are the William D. Ford Federal Direct Loan Program ("FDLP"),
*38The FFELP, originally known as the Guaranteed Student Loan Program, was first created in 1965 as part of the HEA. See Am. Compl. ¶ 26. Later, the FDLP was fully authorized pursuant to the Student Loan Reform Act of 1993 as part of the Omnibus Reconciliation Act of 1993. See ibr.US_Case_Law.Schema.Case_Body:v1">id
FFELP loans were originally issued by private lenders and insured by guaranty agencies, and the federal government reinsured the loans. See
The types of federal student loans created by the HEA, therefore, can be grouped into three different categories for purposes of this lawsuit. First are the FDLP loans - those are owned by the federal government. Second are the FFELP loans that were purchased by the federal government under ECASLA ("Government-Owned FFELP loans") - those are now owned by the federal government. Third are the original FFELP loans ("Commercial FFELP loans") - those are owned by private lenders and the federal government reinsures or guarantees them.3
The DOED extensively regulates the federal student loan industry and has established specific standards and procedures to which borrowers, lenders, educational institutions, and other actors - including loan servicers - must adhere. See 34 C.F.R. Parts 682, 685. With respect to FDLP loans, "DOED is responsible for all aspects of the lending process, from origination to repayment." See Def. Facts ¶ 29 (citing
Consequently, student loans constitute an enormous industry, and the federal government plays a major role. Thirty-four million Americans are obligated to pay federal *39student loans, and the federal government made, owns, or guarantees 92 percent of all student loans in the United States. See Am. Compl. ¶ 4.
B. Federal Regulation of Student Loan Servicers
Student loan servicers serve as a kind of middle-man between lenders and borrowers. Student loan servicers "process[ ] Income-Driven Repayment ('IDR') applications, maintain[ ] account records, send[ ] statements and other account notices, process[ ] payments, process[ ] paperwork associated with a myriad of payment statuses, operat[e] incoming and outgoing call enters to help inform and educate borrowers about their loans and select the best repayment plan within their budget, and even facilitat[e] temporary cessation of payments, all in an effort to avoid the consequences of delinquency and default." See Am. Compl. ¶ 58. The HEA and its implementing regulations govern certain procedures that loan servicers must follow and standards they must meet in servicing federal student loans. See
Congress has delegated to the Secretary of Education the authority to contract directly with servicers for the administration of FDLP loans. See 20 U.S.C. § 1087f. The HEA specifies certain standards that the Secretary must adhere to in selecting and contracting with servicers, 20 U.S.C. § 1087f, but the "[r]egulations do not define the terms of DOED's contracts with FDLP servicers." See Def. Facts ¶ 32 (citing 34 C.F.R. Part 685).
The HEA also grants the Secretary of Education the authority to prescribe regulations to "carry out the purposes of [the FFELP program] ... applicable to third party servicers" and "to establish minimum standards with respect to sound management and accountability."See
The federal government's relationship with servicers, therefore, differs based on the type of federal student loans being serviced. First are the FDLP loans, owned by the federal government - the federal government contracts directly with servicers. Second are the Government-Owned FFELP loans that were purchased by the federal government under ECASLA and are now owned by the federal government - those are serviced pursuant to federal government contracts. Third are the Commercial FFELP loans, owned by private lenders and the federal government reinsures or guarantees them. The private lenders contract directly with third-party servicers.
C. The District of Columbia Law and Final Rules
The Council of the District of Columbia enacted the Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016, known as D.C. Law 21-214 ("D.C. Law"), on December 7, 2016. See Am. Compl. ¶ 74; D.C. Law 21-214, Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016, Council Period 21, Permanent L. (Feb. 18, 2017), https://code.dccouncil.us/dclaws/21/permanent/. The D.C. Law went into effect on February 18, 2017. See Def. Facts ¶ 3. The D.C. Department of Insurance, Securities, and Banking ("DISB") issued three rounds of emergency rules to implement the D.C. Law, each "enforceable upon promulgation until superseded." See Am. Compl. ¶ 114. SLSA has actively engaged with the District of Columbia in providing feedback on the different iterations of the Rules. See ibr.US_Case_Law.Schema.Case_Body:v1">id
The D.C. Law was enacted and the Final Rules were promulgated in response to increasing evidence of misconduct by student loan servicers.7 The Amicus Briefs filed by the State of New York and the Lawyers' Committee for Civil Rights Under Law describe patterns of fraud, abuse, and deceptive practices by servicers, and a lack of regulatory oversight or enforcement by the DOED. See Am. Br. NYS; Am. Br. Lawyer's Committee.8 Because the HEA does not provide a private right of action for borrowers, see *41Nelson v. Great Lakes Educ. Loan Serv., Inc., No. 3:7-CV000183-NJR-SCW,
The D.C. Law was enacted to "protect[ ] student loan borrowers by creating servicer accountability and providing appropriate oversight of the student loan servicing industry through the requirement of licensure." See D.C. Committee Report at 7.9 In practice, the D.C. Law and the Final Rules require servicers to be licensed by the Commissioner of the D.C. Department of Insurance, Securities and Banking ("Commissioner") in order to service the loans of D.C. residents. See D.C. Law 21-214 §§ 7b(a)-(d). To qualify for a license, a servicer must submit an application, obtain a surety bond, pay the associated fees, and comply with on-going requirements - including maintaining a minimum net worth, undergoing periodic financial auditing and annual assessments, submitting an annual report, reapplying annually for a license, and responding to all requests for "[a]ny other information" the DISB considers "necessary and appropriate." See D.C. Law 21-214 § 7b(c)(1)(E); Final Rules §§ 3002, 3003, 3004, 3007, 3009, 3014-15. The Commissioner retains discretion to grant or deny a license and may revoke a license after notice and a hearing. See D.C. Law 21-214 §§ 7b(d), (h)(1). The D.C. Law also creates an "Ombudsman who is responsible for resolving borrower complaints, developing a borrower bill of rights, monitoring and analyzing information and data from borrower complaints, providing information to student loan borrowers, and conducting examinations of student loan servicers." See Def. Facts ¶ 4; D.C. Law 21-214 § 7a.
D. The Case Before this Court
Plaintiff SLSA is a membership organization comprised of student loan servicers. See Am. Compl. ¶ 9. SLSA's national membership consists of 24 student loan servicers that service federal or private loans or both, and 14 affiliate members. See id. ¶ 9. SLSA's members "service over 95 percent of the outstanding [FDLP] and [FFELP] student loans." See id. ¶ 9. All FDLP and Government-Owned FFELP loans are serviced by nine servicers; all nine are members of the SLSA. See Pl. Facts ¶ 54. Fifteen of SLSA's members (including the aforementioned nine) service Commercial FFELP loans. See id. ¶ 55.10
SLSA brought suit on behalf of its members against the District of Columbia; Stephen C. Taylor, Commissioner of the Department of Insurance, Securities, and Banking; and Charles A. Burt, Student Loan and Foreclosure Ombudsman. See *42Am. Compl. ¶¶ 9-12. SLSA challenges the D.C. Law and Final Rules as unconstitutional under the Supremacy Clause as applied to all three types of loans: FDLP loans, Government-Owned FFELP loans, and Commercial FFELP loans. See Pl. Cr-MSJ at 43. The SLSA members who service federal student loans in the District of Columbia - whether they be FDLP, Government-Owned FFELP, or Commercial FFELP loans, or a mix of the three - are subject to the D.C. Law and the Final Rules. See Pl. Facts ¶ 54. SLSA requests two different forms of relief: (1) a declaratory judgment that federal law preempts the D.C. Law and the Final Rules; and (2) an order permanently enjoining the District from enforcing the D.C. Law and Final Rules against student loan servicers. See Am. Compl. at 64.
The Court previously denied without prejudice the District's earlier motion [Dkt. No. 14] to dismiss SLSA's complaint, ruling that the motion was premised on an outdated version of the Rules that had been superseded by the third emergency rules. See Student Loan Servicing Alliance v. District of Columbia,
The question before the Court now is whether the D.C. Law and Final Rules unconstitutionally infringe upon protected federal sovereignty under the Supremacy Clause. The defendants have moved to dismiss SLSA's amended complaint pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the alternative, for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. SLSA has cross-moved for summary judgment under Rule 56.
II. LEGAL STANDARD
A. Motion to Dismiss Under Rule 12(b)(1) of the Federal Rules of Civil Procedure
The District of Columbia argues that the Court lacks subject matter jurisdiction over SLSA's claims pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure because SLSA does not have standing. Federal courts are courts of limited jurisdiction, possessing only those powers authorized by the Constitution and an act of Congress. See, e.g., Janko v. Gates,
*43Tabman v. FBI,
B. Motion to Dismiss Under Rule 12(b)(6) of the Federal Rules of Civil Procedure
The District also moves to dismiss SLSA's amended compliant under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Rule 12(b)(6) allows dismissal of a complaint if a plaintiff fails "to state a claim upon which relief can be granted." See FED. R. CIV. P. 12(b)(6). Generally, under Rule 8 of the Federal Rules of Civil Procedure, a plaintiff need only provide "a short and plain statement of the ... claim showing that the pleader is entitled to relief" that "give[s] the defendant fair notice of what the claim is and the grounds upon which it rests." See Bell Atl. Corp. v. Twombly,
In deciding a motion to dismiss under Rule 12(b)(6), the Court "must accept as true all of the factual allegations contained in the complaint." See Swierkiewicz v. Sorema N.A.,
C. Motions for Summary Judgment
In the alternative, the District moves and SLSA cross-moves for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Anderson v. Liberty Lobby, Inc.,
A disputed fact is "material" if it "might affect the outcome of the suit under the governing law." See Talavera v. Shah,
III. DISCUSSION
A. Standing
As a preliminary matter, the District of Columbia contends that SLSA lacks standing to bring this lawsuit because it has failed to allege sufficient "causation" and a justiciable "injury in fact." See Def. MTD at 21-24.12 The Court disagrees.
"Three inter-related judicial doctrines-standing, mootness, and ripeness-ensure that federal courts assert jurisdiction only over 'Cases' and 'Controversies.' " Worth v. Jackson,
Among other things, the District argues that there is insufficient causation because SLSA members will be required by the D.C. Law and Final Rules to obtain and maintain a license to service private loans, irrespective of the applicability of the D.C. licensing regime to the servicing of federal loans. See Def. MTD at 24-26. SLSA responds *45that the District's argument is irrelevant because the D.C. licensing scheme would require SLSA members to obtain and maintain a license or be barred from servicing their federal loans in the District of Columbia, substantiating causation. See PL Cr-MSJ at 31. The Court agrees. Whether SLSA members must obtain a license to service their private loans is an issue not before this Court. SLSA has explained that its members would be willing to obtain licenses to service their private loans in the District of Columbia. See id. at 31. The issue is whether the D.C. Law requires a license to service federal loans, and it indisputably does.
Nine of SLSA's members service federal loans in the District of Columbia. See Def. Facts ¶ 38. As plaintiff puts it: "If SLSA's members do not apply for a license by this November, the law and its rules forbid them from servicing federal student loans in the District pursuant to federal contracts and permit the District to assess late penalties. If they do apply, the District has the power to deny licensure and prohibit Servicers from servicing federal student loans in the District." See Pl. Cr-MSJ at 31. There is sufficient causation between the application of the D.C. Law and Final Rules and SLSA members' alleged inability to service their federal loans consistent with the HEA and the terms of their contracts with the federal government. Moreover, although the servicers will have to pay a flat fee to obtain a license to service their private loans in the District of Columbia, many of the fees and reporting requirements of the D.C. Law and Final Rules apply on a per borrower or per loan basis, so "SLSA's members would not spend nearly the time and money to comply with these requirements if the licensure applied solely to private student loans." See Pl. Reply at 14.
The District further argues that SLSA relies on hypothetical applications of the D.C. Law and Final Rules to evidence preemption, failing to allege a sufficient injury-in-fact. See Def. MTD at 21. SLSA responds, correctly, that the "regulatory action of requiring its members to be licensed in accordance with the District's criteria" is not hypothetical. See Pl. Cr-MSJ at 34. It is true that the District of Columbia has not yet denied or revoked the license of a federal loan servicer and that the disclosures feared by SLSA have not yet been ordered. Courts have found sufficient injury-in-fact, however, when plaintiffs allege that they face increased compliance costs from conflicting regulatory regimes, as SLSA does here. See, e.g., City of Waukesha v. EPA,
*46The injury faced by SLSA members is not hypothetical, and a pre-enforcement review of the D.C. Law is appropriate. For that reason, the Court concludes that SLSA has standing and therefore will deny the District's motion to dismiss under Rule 12(b)(1).
B. The Supremacy Clause
The Court now turns to the merits of SLSA's challenges to the D.C. Law and Final Rules, all based on the Supremacy Clause of the Constitution. The Supremacy Clause dictates that "the Laws of the United States ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." See U.S. CONST , art. VI, cl. 2.
C. Preemption
The Supremacy Clause vests in Congress the power to preempt state law. See Arizona v. United States,
Foundational principles of federalism caution courts against interpreting a federal statute to preempt state law "unless that [is] the clear and manifest purpose of Congress." See Cipollone v. Liggett Grp., Inc.,
*47CSX Transp., Inc. v. Easterwood,
Congress preempts state law in two ways: express preemption and implied preemption. See Sickle v. Torres Advanced Enter. Sols., LLC.,
In contrast, implied preemption occurs "not through an explicit statutory provision, but through the substantive nature and reach of the federal regulatory scheme that Congress adopts." See Sickle v. Torres Advanced Enter. Sols., LLC.,
SLSA challenges the D.C. Law and Final Rules under all three theories of preemption - express, field, and conflict preemption. The Court will address each theory in turn. Before turning to these three theories, however, the Court will first address the Department of Education's Preemption Notice ("DOED Notice"), which SLSA asserts deserves judicial deference.
*481. Deference to the Department of Education Preemption Notice
The DOED issued informal guidance, published in the Federal Register on March 12, 2018, entitled "Federal Preemption and State Regulation of the Department of Education's Federal Student Loan Programs and Federal Student Loan Servicers." See DOED Notice, Federal Preemption and State Regulation of the Department of Education's Federal Student Loan Programs and Federal Student Loan Servicers,
The parties disagree as to how much deference should be accorded the DOED's Notice. SLSA explains that its claims stand on their own, but that the "Court should [also] defer to the Department's interpretation," which would all but decide this case. See Pl. Cr-MSJ at 39. The District argues that the DOED Notice should be accorded "little [interpretive] deference." See Def. MTD at 42.
The level of deference courts should accord to agencies on the issue of preemption is an unsettled area of law. See Delaware v. Surface Transp. Bd.,
First, the Court considers the DOED's interpretation of the HEA's express preemption provision. This analysis qualifies as "an agency's construction of the statute which it administers," positioned squarely within the Chevron framework. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
Second, the Court considers the DOED's interpretation of its own regulations' preemptive effect under conflict preemption. The Skidmore framework also applies to this aspect of the agency's interpretation.
Having found that so-called Skidmore deference is the appropriate test by which to assess the DOED Notice - as to both its express preemption and conflict preemption interpretation - the Court next determines whether the DOED Notice warrants such deference. The U.S. District Court for the Northern District of Florida is the only court thus far to have considered the DOED Preemption Notice. See Order, Lawson-Ross & Bryne v. Great Lakes Higher Educ. Corp., (N.D. Fla. Sep. 20, 2018) (No. 17-0253) [Dkt. No. 27-4],
*50To be considered persuasive guidance under Skidmore, the Court would need to find the DOED Preemption Notice to be sufficiently thorough, consistent, and persuasive. See Skidmore v. Swift & Co.,
The DOED Preemption Notice fails the Skidmore test most notably because the agency's view represents a stark, unexplained change in the DOED's position. Contrary to SLSA's assertion that the pronouncement is not inconsistent because this "is the first time the Department of Education expressed its interpretation regarding the constitutionality of state licensing schemes for Servicers," the District points to past statements by the United States that explicitly rejected the preemptive effect of the HEA. See Pl. Cr-MSJ at 40; Def. MTD at 43. Those statements include a Statement of Interest filed by the United States in federal court in New York in Sanchez v. ASA College, Inc., No. 14-5006,
SLSA also argues that "[t]he other statements cited by Defendants were all made before [several] states and the District [of Columbia] passed the Servicer licensing schemes and addressed separate topics" and that the DOED Notice is consistent with the United States' Statement of Interest filed on January 8, 2018 in Massachusetts v. Pennsylvania Higher Education Assistance Authority, No. 1784CV02682 (Mass. Sup. Ct.) [Dkt. No. 19-18], and its statement as an intervenor in Chae v. SLM Corp.,
As the District argues, the Preemption Notice also lacks requisite thoroughness and persuasiveness because it fails to specify the regulations that it is interpreting. The Court cannot agree with the Northern District of Florida that the DOED Notice is "well-reasoned and sensible." See Order at 8, Lawson-Ross & Bryne v. Great Lakes Higher Educ. Corp. (N.D. Fla. Sep. 20, 2018) (No. 17-0253) ; Pl. Reply at 24. It is not. The DOED Notice draws broad conclusions about the regulations' preemptive effect without actually interpreting any specific regulations. Thus, the Court gives no deference to the DOED Preemption Notice and turns now to its own independent preemption analysis.
2. Express Preemption
Congress' intent to preempt state law is most easily identified by its own legislative language. Express preemption arises when Congress announces its intent to invalidate state law through "an express preemption provision" explicit in the federal statute itself. See Arizona v. United States,
Despite the existence of several express preemption clauses contained in the HEA, the only express preemption provision discussed by the parties is Section 1098g. Section 1098g provides in full: "Loans made, insured, or guaranteed pursuant to a program authorized by Title IV of the [HEA] ( 20 U.S.C. [§] 1070 et seq. ) shall not be subject to any disclosure requirements of any State law." 20 U.S.C. § 1098g. FDLP loans are authorized pursuant to 20 U.S.C. § 1087a, etseq. (Part D), and FFELP loans are authorized pursuant to
SLSA argues that Congress intended Section 1098g to prohibit states from requiring servicers to report to third parties or to make any disclosures to borrowers that are not explicitly set out in the HEA. See Pl. Cr-MSJ at 61; Am. Compl. ¶ 233. SLSA extrapolates from this reasoning to challenge the entire D.C. licensing scheme, not just the reporting requirements. SLSA argues that because disclosures by servicers to the D.C. government are required to facilitate oversight of licensed servicers, if those disclosures are expressly preempted by the HEA under Section 1098g, then the entire licensing scheme collapses. See Am. Compl. ¶¶ 245-47. The District, on the other hand, maintains that the "disclosure *52requirements" preempted by Section 1098g should be read narrowly to include only particular communications between lenders and borrowers, thus leaving states free to legislate additional requirements related to communications by servicers, as the District of Columbia has done. See Def. MTD at 29-33.
Even if Section 1098g prohibited states from regulating communications by servicers to borrowers, the D.C. Law and Final Rules do not require any such communications. SLSA is only able to point to the D.C. Student Loan Borrower's Bill of Rights as evidence of D.C. requirements that servicers communicate with borrowers. See Am. Compl. ¶¶ 234-40. As an aspirational document, there is nothing to indicate that the District intends to or would be able to enforce the Student Loan Borrower's Bill of Rights. Thus, the D.C. Law and Final Rules do not require any "disclosures" - if defined as communications between servicers and borrowers - that could be preempted by Section 1098g.
This leaves SLSA's argument that Section 1098g expressly preempts state regulation of communications by loan servicers to third parties. See Am. Compl. ¶¶ 229-33. If the Court were to define "disclosure requirements" as including those made by servicers to third parties, SLSA argues that a number of provisions in the Final Rules requiring servicers to report to the D.C. Commissioner or respond to requests for information by the D.C. government would be preempted by Section 1098g. Those provisions include Sections 3014 (annual reporting requirements), 3016 (requirements to notify the Commissioner of certain events), 3018 ("Each licensee shall make applicable books and records available to the Commissioner...."), 3021 (the Commissioner's ability to investigate), and 3022 (the Commissioner may respond to borrower complaints) of the Final Rules. SLSA takes particular issue with the provisions of the D.C. Law that allow the Commissioner to request information based on borrower complaints or in the course of an investigation into "any dishonest activities or [ ] any misrepresentation in any business transaction."See D.C. Law 21-214 § 7b(h)(1); see also Final Rules § 3021; Pl. Cr-MSJ at 66.
No court has considered whether Section 1098g of the HEA expressly preempts state requirements for "disclosures" by servicers to third parties, like those required by the D.C. Law and the Final Rules. Nonetheless, SLSA argues that this Court should align itself with recent decisions by other federal courts that have interpreted Section 1098g within the context of disclosures by servicers to borrowers. See, e.g., Chae v. SLM Corp.,
In Chae v. SLM Corp., plaintiffs claimed that their student loan servicer misrepresented details related to their first repayment date, late fees assessment, and interest rate calculations. See Chae v. SLM Corp.,
In the absence of any controlling precedent, and because Congress retains the exclusive ability to preempt state law expressly, the Court looks to the plain language of Section 1098g as the best evidence of how Congress intended to define the "domain" or scope of the preemption provision. See Medtronic, Inc. v. Lohr,
First, the plain language of the statute does not provide much clarity with respect to the meaning of the word "disclosure." Turning to Black's Law Dictionary, as relied upon by SLSA, a "disclosure" is any "act or process of making something known that was previously unknown; a revelation of facts." See Pl. Cr-MSJ at 62 (quoting Disclosure, BLACK'S LAW DICTIONARY (10th ed. 2014) ). If read consistently with its plain meaning without context, Section 1098g might well prohibit state regulation of all foreseeable types of communication. Without a more explicit indication from Congress that it meant to preempt states from mandating or prohibiting all types of communications within the context of federal student loans, however, the Court declines to read the term "disclosure" so broadly. In light of the presumption against preemption and the fact that express preemption arises only when "the federal statute itself announces its displacement of state law," Sickle v. Torres Advanced Enter. Sols., LLC.,
For the same reasons, the Court rejects SLSA's argument that the larger structure of the HEA should compel this Court to *54broaden its interpretation of "disclosure" to include servicers' communications to third parties. According to SLSA, the broader regulatory scheme set out in the HEA dictates the outermost limits of the "disclosures" that can be required of servicers - that is, states may not require servicers to make any type of "disclosure" that is not set out in the HEA. See Pl. Cr-MSJ at 62; Am. Compl. ¶ 225.18 But the Court does not see any reason to read Section 1098g as prohibiting state regulation of all communications that are additional to those required under the HEA. As one reason, most of the HEA provisions that govern communications cited by SLSA relate to the reporting required by-insurers or lenders, not servicers. See Pl. Cr-MSJ at 61-62.19
Second, the Court looks for clues of Congressional intent elsewhere in the language and structure of the statute. "[I]dentical words used in different parts of the same act are intended to have the same meaning." Taniguchi v. Kan Pac. Saipan, Ltd.,
The legislative history also supports reading "disclosures" as communications only between lenders and borrowers. As the District explains, Section 1098g was first codified as an amendment to the Truth in Lending Act ("TILA"). See S. Rep. No. 97-536, at 42, 71 (1982); Act of Oct. 15, 1982, Pub. L. No. 97-320, § 701, 96 Stat 1469 (1982) ; Def. MTD at 32. In enacting Section 1098g, Congress explained that it would exclude federal student loans from the TILA lending regulations because *55"student loan programs, contained in the Higher Education Act of 1965 ... are already subject to statutory provisions and regulations that provide comparable disclosures and explicit controls over the issuance of loan proceeds to student consumers." See S. Rep. No. 97-536, at 42 (1982) (emphasis added). Under the TILA, "disclosure requirements" are those between "creditor or lessor" to "the person who is obligated on a ... consumer credit transaction," i.e., between a lender and a borrower. See
Without a stronger indication of Congress' "clear and manifest purpose" to preempt all state regulation related to communications between servicers and third parties, the Court declines to read Section 1098g to prohibit the types of reporting requirements created by the D.C. Law and Final Rules. See Cipollone v. Liggett Group, Inc.,
3. Field Preemption
Even where Congress has not expressed its intent to supplant state law, its intention to do so may be inferred when it "occup[ies] the entire field." See Volt Info. Scis. v. Bd. of Trs. of the Leland Stanford Junior Univ.,
Courts identify field preemption "through the substantive nature and reach of the federal regulatory scheme that Congress adopts." See Sickle v. Torres Advanced Enterprise Solutions, LLC.,
id="p56" href="#p56" data-label="56" data-citation-index="1" class="page-label">*56
At the outset, the Court must define the "field" in order to determine if Congress has occupied it. To define the field, the Supreme Court has instructed courts to "consider[ ] the target at which the state law aims." See Oneok, Inc. v. Learjet, Inc.,
Although no court has addressed whether federal law occupies the field of regulating student loan servicers, courts have consistently held that the HEA does not have field preemptive effect. See, e.g., Armstrong v. Accrediting Council for Continuing Educ. and Training, Inc.,
Under the first prong, the Court must determine whether the regulatory scheme is so pervasive that it leaves no room for state supplementation, Sickle v. Torres Advanced Enter. Sols., LLC.,
*57The Supreme Court has explained, however, that the promulgation of comprehensive regulations in a field is not sufficient to find full occupation of that field. "We are even more reluctant to infer pre-emption from the comprehensiveness of regulations than from the comprehensiveness of statutes.... To infer pre-emption whenever an agency deals with a problem comprehensively is virtually tantamount to saying that whenever a federal agency decides to step into a field, its regulations will be exclusive. Such a rule, of course, would be inconsistent with the federal-state balance embodied in our Supremacy Clause jurisprudence." See Hillsborough County v. Automated Med. Labs., Inc.,
It is true that the HEA is a mammoth statute and its implementing regulations pertain to a diverse and extensive number of aspects of higher education. But even when discussing the HEA as a whole, courts have found that the federal government does not occupy the field. See, e.g., Keams v. Tempe Tech. Inst., Inc.,
Under the HEA, the Secretary of Education has the authority to contract directly with servicers to service FDLP loans. See 20 U.S.C. § 1087f(a)(1). Because the terms of the contracts - and not other regulations - govern the servicers of FDLP loans for the most part, the regulatory scheme itself does not evidence Congress' intention to exclude state supplementation in regulating FDLP loan servicers. With respect to FFELP loans, the HEA delegates to the Secretary of Education the authority to "prescribe such regulations as may be necessary to carry out the purposes of [the FFELP], including regulations applicable to third party servicers ... to establish minimum standards with respect to sound management and accountability." See
There is no indication, however, that Congress, in legislating in this field, left no room for state supplementation. See Sickle v. Torres Advanced Enter. Sols., LLC.,
The District points to two other statements authored by agencies of the federal government indicating their agreement that the "substantive nature and reach of the federal regulatory scheme that Congress [has adopted]" is not so pervasive as to exclude state regulation. See Sickle v. Torres Advanced Enter. Sols., LLC.,
Under the second test for field preemption, this Court must determine whether the federal interest is " 'so dominant' that the existence of a federal scheme can 'be assumed to preclude enforcement of state laws on the same subject.' " See Sickle v. Torres Advanced Enter. Sols., LLC.,
Separately, the federal government has a unique interest in protecting the rights and obligations established in its contracts. See Boyle v. United Techs. Corp.,
*59On the other hand, the District of Columbia has a compelling interest in protecting its consumers by providing oversight of federal student loan servicers. According to the Committee of the Whole, Subcommittee on Consumer Affairs of the Council of the District of Columbia, there are 140,000 student loan borrowers residing in the District of Columbia, owing an average of "$40,885 [in student loan debt], about 40 percent higher than the national average." See D.C. Committee Report at 5. Those consumers have encountered difficulties with and reported complaints about their servicers. Between March 2012 and October 2016, CFPB received 225 complaints about student loans from D.C. residents. See id. at 7.
The District also argues that "[a]ny federal interest in regulating student loan servicers cannot compare with those interests courts have found justified field preemption." See Def. MTD at 37 n.18. When courts have found federal law to "occupy the field" to the exclusion of state law it has been in areas like: registration of aliens, Arizona v. United States,
Weighing these factors, the Court concludes that the federal government's interests are not so dominant as to preclude the District of Columbia's legislating on the same subject. See Sickle v. Torres Advanced Enter. Sols., LLC.,
4. Conflict Preemption
Lastly, the Court turns to SLSA's conflict preemption claim. "Even where Congress has not completely displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts with federal law." See Hillsborough County v. Auto. Med. Labs., Inc.,
a. Impossibility Preemption
As noted, there are two possible bases for conflict preemption - impossibility or obstacle preemption. SLSA invokes both. SLSA's "impossibility" argument does not hold water. SLSA argues that its members would be required to violate the HEA in order to comply with a number of the provisions of the D.C. Law and Final Rules. Upon closer inspection of the state and federal provisions, it is apparent that there is no actual conflict on the grounds of impossibility.
First, SLSA argues that the reporting requirements of the D.C. Law and Final Rules conflict with the federal Privacy Act. The Privacy Act governs the disclosure of individuals' personal information by federal government departments and agencies. See
SLSA argues that its members cannot comply with the requirements of the D.C. Law and Final Rules to provide records to the government of the District of Columbia because all requests for information must be made to the DOED; if servicers were to provide records directly to the D.C. government, they would violate the Federal Privacy Act. This is a false conflict. The D.C. Final Rules themselves specify that student loan servicers shall retain records "[e]xcept to the extent prohibited by federal law." See Final Rules § 3018.1. To comply with federal law, the District explains that if it wished to obtain information that might be covered under the Privacy Act, it would "request borrower consent, 34 C.F.R. § 5b.9(a), or submit a written request to DOED, 34 C.F.R. § 5b.9(b)(7)." See Def. Opp. at 18. In addition, the Commissioner retains the discretion to "waive or reduce [record keeping] requirements if [she] determines that compliance would require the licensee to violate federal law." See Final Rules § 3018.4. Furthermore, requests for documentation by the D.C. government could provide for the submission of redacted records that would not disclose borrower information or other individual, personal information, consistent with the Privacy Act. See *61In re Subpoena to Nat'l Sci. Found., Office of Inspector Gen., No. 18-0006,
SLSA also contends that there exist two conflicting dispute resolution mechanisms between the federal and state regulations. Again, this is a false conflict. Section 7a(c)(2) of the D.C. Law gives the D.C. Ombudsman authority to resolve borrower complaints, which is, according to SLSA, in direct contention with HEA implementing regulations, specifically
b. Obstacle Preemption
Finally, the Court turns to the crux of SLSA's conflict preemption argument - and more accurately the core of its entire complaint: obstacle preemption. Here, the D.C. Law and Final Rules have met their match, at least in part. Under obstacle preemption, a state law actually conflicts with federal law when it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." See Hillsborough County, Fla. v. Automated Med. Labs., Inc.,
Unlike with field preemption and express preemption, where the Court can consider the D.C. Law and Final Rules in their entirety, conflict preemption requires the Court to undertake a more detailed analysis to identify actual conflicts between the HEA and the D.C. licensing scheme. For purposes of this conflict analysis, the Court must compare the particular regulations that apply to each of the three types of loans at issue here: (1) the FDLP loans, which the federal government owns and are serviced pursuant to federal government contracts; (2) the Government-Owned FFELP loans, for which the federal government was originally the reinsurer or guarantee agency, but later purchased pursuant to ECASLA - also serviced pursuant to federal government contracts; and (3) the Commercial FFELP loans, the private loans that the government reinsures or guarantees.
*62i. FDLP Loans
SLSA's conflict preemption arguments are on their strongest footing with respect to the federal government's contracting decisions. This argument is premised on recognizing that Congress' purpose in enacting the HEA was to delegate authority to the federal government to select and contract directly with servicers for its FDLP loans. SLSA argues that by creating duplicative and additional requirements for loan servicers, the D.C. licensing scheme impermissibly second-guesses the federal government's decisions to contract with these servicers. See Pl. Reply at 18. The Court agrees.
Courts have consistently held that any state law that impedes the federal government's ability to contract - including state licensing regimes that effectively second guess United States' contracting decisions - are preempted. See, e.g., United States v. Virginia,
The HEA delegates authority to the Secretary of Education to select and contract with loan servicers to service FDLP loans. See 20 U.S.C. § 1087f. The Secretary of Education is instructed to contract "at competitive prices" with those servicers "which the Secretary determines are qualified," specifically those "that have extensive and relevant experience," and have "demonstrated effectiveness." See
The D.C. Law and Final Rules require the same servicers to obtain a license to operate within the District of Columbia. See D.C. Law 21-214 § 7b(a). And the Commissioner retains the ability to grant, deny, or revoke servicer licenses. See Final Rules §§ 3007, 3011, 3019. As part of the Commissioner's initial determination to issue a license, a servicer's application for licensure must include "[e]vidence of the applicant's financial responsibility, character and general fitness" and "[e]vidence demonstrating that the applicant has met the applicable net worth and surety bond requirements." See ibr.US_Case_Law.Schema.Case_Body:v1">id
*63The District argues that "none of [the] requirements [of the D.C. Law and Final Rules] substitutes the District's judgment for DOED's as to 'effectiveness' " and "instead [merely] impose basic business requirements." See Def. Opp. at 20. But the D.C. licensing scheme, in effect, requires SLSA's members to "desist from performance until they satisfy a state officer upon examination that they are competent [to perform their duties] and pay a fee for permission to go on." See Leslie Miller, Inc. v. Arkansas,
The District's principal counter-argument rests on the existence of provisions within servicer contracts that anticipate and require servicers' compliance with state law. A provision in the sample contract submitted by SLSA provides that "contractor(s) will be responsible for maintaining a full understanding of all federal and state laws and regulations ... and ensuring that all aspects of the service continue to remain in compliance." See Sample DOED-Servicer Contract at 24. It is the District's contention that if servicers must comply with state law according to their federal contracts, there can be no conflict. See Def. Opp. at 20. The District points to a letter issued on January 21, 2016 by the DOED to the State of Maryland as evidence that the DOED, at least at one point, agreed with this proposition. In the letter, Vanessa Burton, an attorney with the DOED's Division of Postsecondary Education, explained that if loan servicers were determined to be "collection agencies," the Maryland Collection Agency Licensing Act "would not conflict with the Department's contracts with [loan servicers], which provide generally that loan servicers ... must comply with State and Federal law."See DOED-Maryland Letter at 2. Similarly, a memorandum issued by Ted Mitchell, Under Secretary of DOED, explained that "[s]ervicing contracts should comply with federal and state law, taking any necessary steps to support oversight by federal or state agencies, regulators, or law enforcement officials." See Mitchell Memo at 38.23
The DOED's position, as set forth in its letter and memorandum, and the existence of contractual provisions directing servicers to comply with state law do not save the D.C. Law and Final Rules. The Ninth Circuit held in Gartrell Constr. Inc. v. Aubry that similar contractual provisions requiring a federal contractor to "obtain any necessary licenses and comply *64with any applicable state laws, codes and regulations" did not negate the binding effect of Leslie Miller. See Gartrell Constr. Inc. v. Aubry,
The District's attempts to distinguish the Leslie Miller line of cases are also unsuccessful. See Def. MTD at 52. The factual differences between those cases and the one before this Court are inconsequential. In particular, the District argues that Leslie Miller should not apply because federal student loan servicing contracts do not pertain merely to a federal installation, as in Leslie Miller, but rather concern a third-party - the student borrowers - implicating strong state consumer protection concerns that were not present in Leslie Miller and its progeny. See Def. MTD at 54, But Leslie Miller and its progeny are not so limited. In Sperry v. Florida ex rel. Fla. Bar, the Supreme Court applied Leslie Miller to vacate an injunction enjoining a non-lawyer from practicing before the United States Patent Office because he was not licensed by the state bar. See Sperry v. Florida ex rel. Fla. Bar,
Moreover, the fact that Leslie Miller and its progeny did not explicitly employ a presumption against preemption is not dispositive.24 The presumption against preemption applies here when considering congressionally-delegated contracting decisions, regardless of courts' previous analysis. That presumption is overcome if there is indication of Congress' "clear and manifest purpose" to preempt state law. See Cipollone v. Liggett Grp., Inc.,
ii. Government-Owned FFELP Loans
The rationale employed to find the D.C. Law and Final Rules preempted as they apply to the servicing of FDLP loans also would apply to the servicing of Government-Owned FFELP loans. ECASLA temporarily authorized the DOED to purchase FFELP loans. See Ensuring Continued Access to Student Loans Act of 2008, § 7, Pub. L. No. 110-227,
As owners of $94 million worth of Government-Owned FFELP loans, the federal government is now a party to the servicing contracts and the loans are federal assets. See Am. Compl. ¶ 197. According to the parties, the DOED contracts with the same nine loan servicers to service both FDLP and Government-Owned FFELP loans. See Goldstein Declaration at 3; Def. Facts ¶ 38; Pl. Facts ¶ 54; U.S. SOI at 4 n.5. Thus, under Leslie Miller , the DOED's contracting decisions with respect to servicing Government-Owned FFELP loans should be accorded the same preemptive effect as those decisions in the context of its FDLP loans.
Unlike FDLP loans, however, the federal government was not an original party to the contracts between the lenders and servicers of the FFELP loans, and it therefore did not play a role in assessing servicer fitness when the contract originated. It is possible to read Leslie Miller and its progeny as protecting federal contracting decisions premised on determinations of "initial responsibility" - the federal government's choice to enter into a contract with a contractor. See Transcript at 28. But, the Court does not see any reason to draw a distinction between those contracts into which the federal government entered initially, and those that it assumed and enforces. Here, Congress determined that it was at the DOED's discretion to retain the same servicer or to choose a different one, to modify or nullify the lender-servicer contracts it assumed, and presumably the DOED undertook the same kind of "responsibility" assessment when it purchased the FFELP loans.
As the Ninth Circuit put it: "The concern in Leslie Miller was that a state was asserting a right or power of review over the federal government's determination of 'responsibility.' The Court did not focus on the distinction between bidding and performance but on the state's interference with the federal government's responsibility determination. That interference occurs when, as here, the state requires a contractor with the federal government to comply with its licensing laws even if that *66requirement is not enforced until after performance has begun." Gartrell Constr. Inc. v. Aubry,
iii. Commercial FFELP Loans
Unlike FDLP and Government-Owned FFELP loans, the federal government does not contract with servicers for the servicing of Commercial FFELP loans. Nor has it purchased those loans and assumed the obligations and responsibilities under contracts governing the servicing of Commercial FFELP loans. It acts only as a reinsurer or guarantor. Loan servicers contract directly with private lenders to service Commercial FFELP loans. Those contracting decisions, therefore, are not accorded the same type of preemptive effect mandated by the Leslie Miller line of cases. And the Court agrees with the District of Columbia that there is no reason to "[i]mmunize [s]tudent [l]oan [s]ervicers [f]rom [s]tate [r]egulation [m]erely [b]ecause [s]ome [a]lso [a]ct as [f]ederal [c]ontractors." See Def. Opp. at 19. The federal government nonetheless has some regulatory authority over Commercial FFELP loans under the HEA. For that reason, the Court now turns to the remainder of SLSA's conflict preemption arguments as they apply to Commercial FFELP loans. Because the regulation of those loans by the District of Columbia is not preempted under the Leslie Miller line of reasoning, the Court analyzes them under more traditional principles of obstacle preemption.
Under the obstacle theory of conflict preemption, the Court must first identify a congressional purpose and then determine whether the state regulation obstructs the accomplishment of that purpose - that is, whether it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." See Hillsborough County v. Automated Med. Labs., Inc.,
*67According to SLSA, Congress had three relevant goals or purposes in mind when enacting the HEA: (1) to operate student loan programs cost-efficiently (saving taxpayer money); (2) to protect taxpayer money by preventing student loan default; and (3) to administer the federal student loan programs, and specifically loan servicing, in a uniform manner. See Pl. Am. Compl. ¶¶ 171-76. The Court concludes that the presumption against preemption is not overcome here because the D.C. Law and Final Rules do not impermissibly obstruct any of these three asserted congressional goals as applied to Commercial FFELP loans.
At the outset, the Court considers Congress' own description of its purpose in enacting the HEA. Section 1071 of the HEA states that FFELP was intended to "enable the Secretary [of Education] (A) to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions ..., (B) to provide a Federal program of student loan insurance for students or lenders who do not have reasonable access to a State or private nonprofit program of student loan insurance ..., (C) to pay a portion of the interest on loans to qualified students which are insured [under FFELP], and (D) to guarantee a portion of each loan insured under a program of a State or of a nonprofit private institution or organization." See
First, the Court has found no evidence that Congress intentionally sought to save taxpayer money when it created the FFELP program. SLSA points to the fact that the HEA itself requires the Secretary of Education to award servicer contracts at "competitive prices." See 20 U.S.C. § 1087f(a)(1) ; Pl. Reply at 19-20. But that provision relates to FDLP loans where the government is directly lending government money. The legislative history is clear that one of the overarching goals of Congress in creating the FDLP was to "reduce the costs of the student loan program to taxpayers and borrowers." See 139 Cong. Rec. S5585-02, at S5627 ; 139 Cong. Rec. H2297-02 ; Pl. Facts ¶ 17. There is no indication, however, that saving taxpayer money motivated the creation of the FFELP. For example, in attempting to improve access to higher education for borrowers, the federal student loan programs purposefully act contrary to the federal government's financial interests by subsidizing loans and offering more lenient interest rates. See, e.g., 20 U.S.C. §§ 1077a, 1078 ; H.R. Rep. No. 103-111, at 158 (1993); Am. Compl. ¶ 32. While cost-efficiency might be an ever-present goal of Congress, without more explicit evidence, the Court finds that saving taxpayer money did not underpin Congress' purpose or intent in legislating in the area of FFELP servicing.
Second, the Court is unpersuaded that Congress consciously aimed to protect taxpayer money by preventing student loan default when it created the FFELP program. SLSA provides no support for this assertion, relying only on the DOED Preemption Notice, which states in a conclusory fashion that protecting taxpayer money was a goal of Congress - also without any substantiation. See DOED Notice at 3-4. Indeed, the federal student loan programs themselves operate contrary to this goal in order to improve access to higher education for all students. Borrowers need not *68pass a credit test to take out a federal loan, which could lead to a higher risk of delinquency or default. See
Finally, SLSA focuses on the congressional goal of uniformity, and this is its strongest obstacle preemption argument.25 In deciding whether uniformity motivated Congress in passing the HEA, courts have come to different conclusions. Compare Coll. Loan Corp. v. SLM Corp.,
In the absence of any controlling authority, the Court begins with the text and structure of the statute and then considers legislative history. The term "uniformity" features most prominently in Section 1082 of the HEA. Subpart L of Section 1082 of the HEA - entitled "Uniform administrative and claims procedures" - provides that "[t]he Secretary shall, by regulation ... prescribe standardized forms and procedures" regarding a number of procedures, including origination of loans, electronic funds transfers, guaranty of loans, and servicing. See
*69See Def. MTD at 47. The Court agrees with the District. See Bourbeau v. Jonathan Woodner Co.,
Looking beyond the text of the statute to its legislative history, the congressional record provides no greater support for SLSA's broad uniformity argument. It indicates only that Congress sought to simplify the federal student loan process for borrowers. As the House Committee Report notes, "H.R. 3553 [the 1992 amendments to the HEA] simplifies the student financial aid programs. Many students and their families are denied access to student aid because they cannot navigate through the bewildering complexity of the current student aid forms and delivery system. This complexity has become a new barrier to educational opportunity. H.R. 3553 provides for dramatic simplification including a single free Federal form for applying for Federal student aid and a single need analysis." See H.R. Rep. No. 102-447, at 343 (1992). From this record, the Court concludes that Congress intended to simplify the FFELP program for student borrowers in order to further its foundational objective - improving access to higher education for all borrowers - nothing more. Congress sought the uniform administration of the FFELP program to the extent that it ensures that all borrowers have the same opportunity to obtain federal student loans.
If the Court assumes that the uniform administration of the FFELP program, including the use of standardized forms and procedures, was a congressional goal or purpose, the question is whether that purpose is obstructed or impeded by the D.C. Law and Final Rules. See, e.g., Volt Info. Scis., Inc. v. Bd. of Trs. of the Leland Stanford Junior Univ.,
The D.C. Law and Final Rules set standards that student loan servicers must meet and procedures they must follow to be found eligible to do business in the District of Columbia. See, e.g., Final Rules §§ 3002-04. Those standards, however, do not interfere with the uniform administration of the DOED's regulations. The HEA tasks the Secretary of Education with setting minimum standards by issuing regulations:
[The Secretary of Education] may prescribe such regulations as may be necessary to carry out the purposes of this part, including regulations applicable to third party servicers (including regulations concerning financial responsibility standards for, and the assessment of liabilities for program violations against, such servicers) to establish minimum standards with respect to sound management and accountability of [the FFELP program].
See
In the absence of statutory text and legislative history to support its position, SLSA relies almost exclusively on the DOED's Preemption Notice and on the Ninth Circuit's decision in Chae v. SLM Corp. as evidence that Congress' goal of uniformity is obstructed by the District of Columbia's licensing scheme. See Chae v. SLM Corp.,
*71The Court is not persuaded by the argument that if the D.C. licensing scheme is upheld, servicers would be subject to 51 different types of processes and rules, thus undermining Congress' goal of administering federal student loan programs uniformly. See Pl. Cr-MSJ at 55. Private companies are subject to 51 different sets of taxation, reporting, and licensing regimes in a broad range of industries that are similar to the licensing scheme created by the District of Columbia here. There is nothing wrong with subjecting third-party loan servicers, who contract with private lenders, to varying types of licensing and regulatory schemes, so long as those regimes do not conflict with the federal regulatory standards or impede borrowers' access to student loans - which, the Court concludes, the D.C. licensing scheme does not.
Moreover, the D.C. Law and Final Rules do not actually conflict with the Secretary of Education's authority to review servicers' compliance with the DOED's baseline qualifications. The DOED regulations provide for enforcement of its minimum standards: "The Secretary [of Education] may review a third-party servicer to determine that it meets the administrative capability and financial responsibility standards in this section.... If the servicer does not, the Secretary may initiate an administrative proceeding." See
If, on the other hand, the DOED undertakes a review of a third-party servicer and deems that servicer to be qualified, the District of Columbia could come to the opposite conclusion based on its own additional criteria. The standards that the DOED has created are baseline qualifications - the DOED has set the floor. An actual conflict does not exist when a state adds qualifications that are additional to, and in no way displace those created by the federal government. And that is all *72that the District of Columbia has done here. The DOED serves as a "check" on the fitness of servicers of Commercial FFELP loans - it does not undertake a threshold analysis of servicer eligibility, nor does it have the authority to enforce its affirmative determinations of eligibility. Consistent with the presumption against preemption, the Court declines to conclude that the potential for a conflicting eligibility determination - that is, if the DOED determines a third-party servicer qualified to service Commercial FFELP loans, and the District of Columbia denies that servicer a license - constitutes an actual conflict for purposes of conflict preemption. As this Court has said, "[a] state law that imposes additional requirements over and above those imposed by a federal law does not ... necessarily 'conflict' with federal law." See Bourbeau v. Jonathan Woodner Co.,
In sum, the Court concludes that the D.C. Law and Final Rules are not preempted as applied to the servicing of Commercial FFELP loans because the D.C. licensing scheme does not conflict with the HEA under either impossibility or obstacle preemption. For these reasons, the Court will grant SLSA's motion for summary judgment on its First Claim (conflict preemption) in part and deny it in part. SLSA is entitled to judgment as a matter of law and a declaratory judgment on its conflict preemption claim as it respects servicing of (1) FDLP loans and (2) Government-Owned FFELP loans, but not with respect to (3) Commercial FFELP loans.
D. Intergovernmental Immunity
Even though the D.C. Law and Final Rules are not preempted as applied to Commercial FFELP loans, they may still be unconstitutional if they violate the overarching doctrine of intergovernmental immunity derived from the Supremacy Clause. See North Dakota v. United States,
As an initial matter, the Court addresses the District's argument that it is not appropriate for the Court to consider the intergovernmental immunity argument at all. The District points out that the intergovernmental immunity theory was initially raised by the United States in its Statement of Interest, not by SLSA in its opening brief. See Def. IG Immunity at 5. But the District has not identified a single rule that prohibits the Court from considering SLSA's argument, and the cases that the District relies upon are not persuasive. Most of them are appellate court decisions that discuss the scope of the issues that courts of appeal may consider on appeal if they have not been raised first in the district court. Those cases and their reasoning are inapplicable here. See id. at 5.
SLSA explains that it is appropriate for the Court to consider the intergovernmental immunity argument because, in its complaint, it asked for relief under the Supremacy Clause, which encompasses both legal theories - preemption and intergovernmental immunity. As SLSA's counsel put it: "[A] complaint which asks for relief *73under preemption or a complaint which asks for relief under intergovernmental immunity is asking for relief under the [S]upremacy [C]lause." See Transcript at 50. The Court is not persuaded by this argument, but nevertheless thinks it is appropriate, in its discretion, to consider the intergovernmental immunity argument.
Rule 8 of the Federal Rules of Civil Procedure, which governs the sufficiency of a complaint, "does not require a plaintiff to set forth in [its] complaint all of the legal theories on which [it] may rely. Any theory advanced, however, must be supported by the facts in the complaint and a defendant must have notice and the opportunity to respond." See Otay Mesa Prop. L.P. v. U.S. Dep't of Interior,
Under the intergovernmental immunity doctrine, "a state regulation is invalid only if it [1] regulates the United States directly or [2] discriminates against the Federal Government or those with whom it deals." See North Dakota v. United States,
Under the first prong of the intergovernmental immunity doctrine, only those state laws that regulate the federal government directly are unconstitutional. See North Dakota v. United States,
To determine if the D.C. Law and Final Rules qualify as direct regulation of the federal government, the Court looks to analogous case law. On the one hand, courts have invalidated state laws that interfered with a federal contractor's ability to "discharge its contractual obligations"
*74consistent with the terms set out by the federal government. See, e.g., Boeing Co. v. Movassaghi,
The fact that the federal government guarantees and reinsures Commercial FFELP loans is also insufficient to warrant providing intergovernmental immunity. Intergovernmental immunity prevents states from regulating the federal government's "operations" or its "property." See Blackburn v. United States,
Under the second prong of the intergovernmental immunity doctrine, the D.C. Law and Final Rules may still violate the intergovernmental immunity doctrine if they discriminate against the federal government or those with whom it deals. To find that a state law discriminates against the federal government, the Court must conclude that the state "treats someone else better than it treats" the federal government or those with whom it deals. See North Dakota v. United States,
SLSA argues that the District of Columbia's purpose in enacting the D.C. Law and Final Rules should be dispositive in finding the D.C. licensing scheme discriminatory. Specifically, SLSA argues, the D.C. licensing scheme was created because the District of Columbia disagrees with federal policy, and the D.C. Law was intended to correct perceived deficiencies in the federal government's regulation of student loan servicers. It maintains that the Council of the District of Columbia targeted the federal government, as evidenced by the statute's legislative history and the Council's choice to regulate student loan servicing, in which the federal government plays a major role, as opposed to other types of loan servicing. See Pl. IG Immunity at 8-10. The Supreme Court has never addressed whether discriminatory intent is enough to violate the Supremacy Clause. But "[i]t is a familiar principle of constitutional law that [the Supreme] Court will not strike down an otherwise constitutional statute on the basis of an alleged illicit legislative motive." See United States v. O'Brien,
The D.C. Law and Final Rules, therefore, do not violate the intergovernmental immunity doctrine as they apply to Commercial FFELP loans. The D.C. licensing scheme constitutionally regulates servicers in their servicing of Commercial FFELP loans. The Court will deny SLSA's motion for summary judgment on its First Claim for declaratory judgment as it respects servicing of Commercial FFELP loans.
IV. CONCLUSION
For the reasons set forth in this Opinion, the D.C. Law and Final Rules are preempted under principles of conflict preemption as they relate to the servicing of FDLP and Government-Owned FFELP loans, but not with respect to Commercial FFELP loans. Under Claim One, conflict preemption, SLSA is entitled to judgment as a matter of law with respect to its members' servicing of FDLP and Government-Owned FFELP loans. The Court therefore declares the D.C. Law 21-214 and Final Rules preempted under the Supremacy *76Clause as applied to the servicing of FDLP and Government-Owned FFELP loans. The District of Columbia is enjoined from enforcing the D.C. Law 21-214 and Final Rules against student loan servicers with respect to their servicing of FDLP and Government-Owned FFELP loans.
SLSA is not entitled to judgment as a matter of law with respect to its field preemption (Claim Two) or express preemption (Claim Three) claims, nor is it entitled to judgment as a matter of law with respect to its conflict preemption claim (Claim One) as it relates to its members' servicing of Commercial FFELP loans. The D.C. Law 21-214 and Final Rules may remain in place, and SLSA's members must comply with the D.C. Law 21-214 and Final Rules with respect to their servicing of Commercial FFELP loans. The Court suggests that the District of Columbia clarify for servicers operating in the District of Columbia how to comply with its licensing scheme with respect to servicing some, but not all, of their loans. An Order consistent with this Opinion shall issue this same day.
SO ORDERED.
351 F. Supp. 3d 26 (Student Loan Servicing Alliance v. Dist. of Columbia) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.