MEMORANDUM OPINION AND ORDER
ROBERT C. 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
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,
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
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).
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. See 34 C.F.R. §§ 682.402(e)(1), (2)(ii). The Secretary must also report the discharge to all credit reporting agencies. Id. at § 682.402(e)(iv). Additionally, a parallel regulation in the context of Direct Loans requires the Secretary, upon determining a borrower is eligible for discharge, to notify the borrower by mail about his or
B. Ms. Adams's FFEL Loan
According to the Complaint, in 1986 Ms. Adams obtained a FFEL loan for $2,500.00 from the now-shuttered Florida Federal Savings and Loan ("FFSL"). Compl. ¶¶ 4, 20. Ms. Adams used the loan to attend the for-profit PTC Institute in Florida. Compl. ¶ 4. At the time she applied for the FFEL loan, Ms. Adams did not have a high school diploma or a General Educational Development credential ("GED"), Compl. ¶ 2, which made her ineligible for a FFEL loan unless the institution demonstrated, in one of several manners prescribed by regulation, her ability to benefit ("ATB") from the education or training offered by the institution. 20 U.S.C. § 1091(d); 34 C.F.R. §§ 668.32(e), 668.141-156.
In 1992, Ms. Adams moved to West Virginia and was later awarded Social Security Supplemental Income ("SSI") benefits for mild mental retardation, minimal literacy, and dependent personality syndrome. Compl. ¶ 2. Her SSI benefits were around $700 a month at that time.
Eventually, Ms. Adams defaulted on her FFEL loan. Pursuant to the provisions of the FFEL Program, the loan was assigned to the Department, which became the holder of Ms. Adams's loan.
In 1995, the Secretary conducted an investigation and found sufficient evidence to provide a group discharge to borrowers who used their FFEL loans to attend PTC Institute from January 1, 1986 through June 30, 1990. Compl. Ex. C; Compl. Ex. E. The Secretary's determination was based on a finding by the Department's Inspector General that PTC Institute had falsely certified the eligibility of its students for FFEL loans during this time period. Compl. Ex. C.
In March 2006, Ms. Adams, not knowing about the 1995 group discharge, applied to have her FFEL loan discharged. Compl. Ex. E. In her application, however, Ms. Adams identified incorrectly the school she attended as the Chi Institute, rather than PTC Institute. Id. Ms. Adams's application was denied on the ground that attendees of the Chi Institute were not eligible for a group discharge. Id. The Secretary's records indicate the letter rejecting Ms. Adams's application was dated April 14, 2006.
After the Department denied Ms. Adams's discharge request, it recognized her loan as rehabilitated and sold it along with FFEL loans originated by PTC Institute. More specifically, in 2007 a collection contractor working for the Department contacted Ms. Adams and suggested she rehabilitate her loan. Compl. ¶ 14-15. Not realizing her loan was subject to the 1995 group discharge, Ms. Adams rehabilitated her loan on October 8, 2007. Id. In 2008, the Department sold Ms. Adams's loan along with others subject to the 1995 group discharge to SunTrust. SunTrust in turn hired American Education Services (AES) to collect on Ms. Adams's loan. Pursuant to AES's efforts, Ms. Adams started paying $78.00 a month on her rehabilitated but group discharged loan.
On October 8, 2012, Ms. Adams received notice from the guaranty agency for her loan, the Educational Credit Management Corporation ("ECMC"), that her rehabilitated loan was in default. Compl. ¶¶ 24, 26; Exhibit E. But she was later informed, through counsel, by ECMC that her loan was eligible for discharge based on the Secretary's 1995 group discharge. Ms. Adams applied for the discharge; the discharge was recognized by the Department; and Ms. Adams received a refund for all payments she made on the loan beginning in 2007, totaling $2,572.96. Compl. ¶ 29. Ms. Adams was not refunded interest on the money she had paid since 2007.
C. Ms. Adams's Demand for Relief
In her Complaint, Ms. Adams seeks review under the APA, 5 U.S.C. § 701, et seq., and the Declaratory Judgment Act, 28 U.S.C. § 2201, et seq., of at least two Department decisions that harmed her. Compl. ¶ 6. First, she contends the Department's decision to sell group discharged FFEL loans to institutions intending to collect on those loans was in violation of law, namely the agency's rules and prior group discharge finding. Compl. ¶ 12. More specifically, the Department violated its own rules surrounding proper sale of rehabilitated FFEL loans when it sold Ms. Adams's group discharged loan to SunTrust for collection purposes while the Department either (1) knew the loan was not rehabilitated and unenforceable under the Department's regulations, or (2) did not first determine whether the loan was actually enforceable. Compl. ¶¶ 35-39, 41. As a result, Ms. Adams unnecessarily made payments on her previously discharged loan, for which the Department reimbursed her without paying interest to her. Compl. ¶¶ 12, 30, 31. On this first APA claim, Ms. Adams asks to overturn the Secretary's decision to rehabilitate and sell her FFEL loan and those of others' similarly situated. She also asks for equitable relief, including enjoining the Department from attempting to collect on or sell group discharged FFEL loans, and requiring the Department to direct guaranty agencies and others to cease and desist from collection efforts for group discharged loans. Compl. ¶ 48, 49, 52, 53, 63, 65, 70.
Second, in her response to the Secretary's motion to dismiss, Ms. Adams clarifies that she also asks to overturn the Secretary's decision to refund the money she paid under her discharged loan since 2007 without paying interest on that money. Compl. ¶¶ 64; Pl.'s Resp. 10, ECF No. 13. Ms. Adams claims the Secretary's decision to not refund her money with interest was arbitrary, capricious, or not in accordance with law. Compl. ¶¶ 64; Resp. at 10. In her APA claim for interest, Ms. Adams seeks relief not already accorded to her by the discharge and refund, including, interest on the money she was refunded.
Ms. Adams also seeks to represent two classes of people who have had their group discharged loans sold for collection purposes. Compl. ¶ 47. Within these classes are people like Ms. Adams, who have had their group discharged loans sold, made payments on the loans, and were refunded their money without interest. The classes would also include people unlike Ms. Adams, who have had their group discharged loans sold and who are currently making payments on their loan, having no notice of the group discharge. According to Ms. Adams, people in this second group are entitled not only to interest, but also refund of money they paid on their discharged loan and other money.
Having recited the regulatory background and factual developments, the Court will next explain the legal standard for resolving the Secretary's motion to dismiss for lack of subject matter jurisdiction and then discuss the Secretary's motion.
II. Legal Standard
Federal Rule of Civil Procedure 12(b)(1) governs motions to dismiss for lack of subject matter jurisdiction. As Plaintiff, Ms. Adams bears the burden of proving that subject matter jurisdiction exists. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir.1999). "When a defendant challenges subject matter jurisdiction pursuant to Rule 12(b)(1), `the district court is to regard the pleadings as mere evidence
The Secretary argues dismissal under Rule 12(b)(1) for lack of subject matter jurisdiction is proper for two reasons.
A. Sovereign Immunity
The Secretary contends this Court lacks subject matter jurisdiction to grant Ms. Adams's requested injunctive relief because the HEA does not waive sovereign immunity with respect to injunctive relief. In support of his position, the Secretary points to the HEA section waiving sovereign immunity and granting jurisdiction to federal district courts, which says the Secretary may sue and be sued in any district court of the United States, "but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Secretary." 20 U.S.C. § 1082(a)(2). Ms. Adams responds that she brings this action pursuant to the APA, 5 U.S.C. § 701, et seq., not the HEA.
The APA waives sovereign immunity of the United States in suits against administrative agencies brought by individuals who have been adversely affected or aggrieved by agency action. 5 U.S.C. § 702 (2014); Hire Order Ltd. v. Domenech, No. 10-1464, 2011 WL 2144537, at *3 (E.D.Va. May 26, 2011) aff'd, 698 F.3d 168 (4th Cir.2012). Under the APA, once an agency has taken "final agency action," a court may review that action and set it aside if the action is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Many federal district and circuit courts have concluded the APA grants federal courts subject matter jurisdiction over cases seeking declaratory and injunctive relief for injuries caused by the Secretary's decisions made under the HEA. See, e.g., McGuire v. Duncan, No. 14-1017, 2015 WL 5735273, at *5 (E.D.Mo. Sept. 29, 2015) (permitting student-borrower to bring action under APA reviewing Secretary's decision under HEA not to discharge her falsely certified loan, finding Department's false certification regulation in violation of HEA, and remanding to Secretary for further proceedings); Johnson v. U.S. Dep't of Educ., 580 F.Supp.2d 154, 157 (D.D.C.2008) (APA review of Secretary's decision not to discharge loan); Gill, 226 F.Supp.2d at 370 (APA review of Secretary's interpretive rule under FFEL
Ms. Adams seeks declaratory and injunctive relief under the APA, namely overturning two of the Secretary's decisions that harmed her. Specifically, she asks the Court to overturn the Secretary's decision in 2007 to rehabilitate loans that were group discharged in 1995 and to sell them in 2008 to entities intending to collect on those loans.
In reply, the Secretary makes three arguments specifically for dismissal of Ms. Adams's APA claim for interest.
Second, the Secretary argues the APA incorporates all limitations on the waiver of sovereign immunity prescribed by other statutes, and therefore, Section 1082(a)(2)'s anti-injunction provision requires the Court to dismiss Ms. Adams's APA claim for interest. In support of this position, the Secretary points out that nothing in the APA "`confers authority to grant relief if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought.'" Def.'s Reply 3, ECF No. 14 (citing 5 U.S.C. § 702(2)). This argument fails. The HEA does not expressly prevent suits like Ms. Adams's, which ask, in part, to overturn a decision by the Department allegedly arbitrary and capricious or in violation of law. Furthermore, as discussed above, several courts have recognized that individuals harmed by the Secretary's FFEL Program decisions may have the Secretary's decision overturned and seek injunctive relief pursuant to the APA. See Jordan, 194 F.3d at 171; Student Loan Mktg. Ass'n, 907 F.Supp. at 474 (citations omitted); Int'l Dealers Sch., Inc. v. Riley, 840 F.Supp. 748, 749 (D.Nev.1993) (rejecting argument that HEA Section 1082 barred injunctive relief and finding APA granted jurisdiction over claim seeking injunctive relief against Secretary); see also Johnson, 580 F.Supp.2d at 157; Oklahoma Aerotronics, Inc. v. United States, 661 F.2d 976, 977 (D.C.Cir.1981) (rejecting argument that
Lastly, the Secretary contends Ms. Adams's APA claim for interest must be dismissed because the United States has not waived sovereign immunity with respect to interest awards. The APA waives sovereign immunity only for actions seeking "relief other than money damages." In re Howard, No. 13-5261, 2014 WL 4628254, at *1 (D.C.Cir. July 14, 2014) (citing 5 U.S.C. § 702). Furthermore, "[a]part from constitutional requirements, in the absence of specific provision by contract or statute, or express consent by Congress, interest does not run on a claim against the United States." Library of Cong. v. Shaw, 478 U.S. 310, 317, 106 S.Ct. 2957, 92 L.Ed.2d 250 (1986); Woolf v. Bowles, 57 F.3d 407, 409 (4th Cir.1995). However, the Secretary reads Shaw too broadly by asking the Court to apply it to Ms. Adams's APA claim. In this case, Ms. Adams does not ask for interest on a claim against the United States, such as the Title VII claim in Shaw. Instead, her Complaint is reasonably read as asking to overturn the Secretary's decision that she was not entitled to interest on money she paid under her discharged FFEL loan since 2007. Thus, Ms. Adams's APA claim for interest falls outside the no-interest rule applied in Shaw because if the Secretary's decision to refund money without paying interest was arbitrary and capricious or in violation of law, the Court could overturn the Secretary's decision and remand the case back to the Secretary for further proceedings. See Bowen v. Massachusetts,
In sum, the APA grants this Court subject matter jurisdiction over Ms. Adams's claims for declaratory and injunctive relief against the Secretary for the Department's decisions made under the HEA. Ms. Adams does not bring her claims under the HEA, and any limit on the waiver of sovereign immunity in the HEA as to injunctive relief has no bearing on jurisdiction over this APA action. Ms. Adams's APA claims are timely and she may challenge the Secretary's decision that she was not entitled to interest on the money refunded to her in 2014.
The Secretary contends Ms. Adams's case is moot because Ms. Adams has had her FFEL loan discharged and received a refund of money she paid under the loan since 2007, which the Secretary claims is all the relief to which she is entitled.
Article III of the U.S. Constitution limits the jurisdiction of federal courts to deciding "cases" and "controversies." U.S. Const. art. III, § 2. Therefore, federal courts are prohibited under principles of justiciability from deciding cases that become moot before or during litigation.
Ms. Adams's case seeks APA review of two Department decisions; both of her claims based on these decisions are live and she has a legally cognizable interest in their outcome. First, she asks to
Even if Ms. Adams's claim seeking to overturn the Secretary's decision to rehabilitate and sell group discharged FFEL loans was moot, the exception to the mootness doctrine for cases challenging conduct capable of repetition yet evading review should be applied in this case. Generally, the capable of repetition yet evading review exception applies when (1) the challenged action is too short in duration to be fully litigated prior to cessation or expiration; and (2) there is a reasonable expectation that the same complaining party will be subject to the same action again. Lux v. Judd, 651 F.3d 396, 401 (4th Cir.2011) (citation omitted). The exception's second prong is relaxed in cases challenging ongoing government policy or decisions because even where the policy or decision no longer affects the particular plaintiff who brought the challenge, it has effects that continue to affect others or will affect others in the future. Ukrainian-Am. Bar Ass'n, Inc. v. Baker, 893 F.2d 1374, 1377 (D.C.Cir.1990); see
To conclude, Ms. Adams's case is not moot. The Secretary fails to carry his heavy burden of demonstrating that Ms. Adams's claims are not live and that she has no personal stake in this matter. Even if Ms. Adams's case were moot, this is an appropriate case for applying the capable of cessation yet evading review exception because the Secretary's challenged action constitutes a government decision that continues in force and adversely effects Ms. Adams and others. Therefore, the Secretary's motion to dismiss on mootness grounds must be denied.
For the preceding reasons, the Court
Id. at 33. Lastly, the Subcommittee found "the Department of Education had all but abdicated its responsibility to the students it [was] supposed to service...." Id. at 33. Based on its findings, the Subcommittee recommended several actions by the Department and others to return the program's "focus to serving the interests of the students." Id. at 34. Specifically, the Subcommittee stated "[w]hen abuse and/or fraud are found, the Department ... must act swiftly and decisively" because "inaction, delays and unnecessary procedural hurdles have halted effective action in the past. The Department should review and streamline current hearing and procedural requirements, eliminating unnecessary delays." Id. at 36. The Subcommittee also recommended the Department:
Id. at 37 After the Nunn report, Congress enacted the 1992 HEA Amendments, which require the Secretary to discharge FFEL loans belonging to students whose eligibility to borrow was falsely certified by their school. See Salazar, 2015 WL 252078, at *4. Under the 1992 HEA Amendments, the Department promulgated the group discharge regulation set forth at 34 C.F.R. § 682.402(e)(15).
20 U.S.C.A. § 1087 (emphasis added). Additionally, although the Secretary has refunded Ms. Adams the money she paid on her discharged loan since 2007, Ms. Adams also went into default on that discharged loan and default carries additional fees. "One of the most serious consequences of default and delinquency for the borrower is that lenders may assess collection costs, fees, or penalties that the borrower must pay in addition to any principal and interest." Doug Rendleman & Scott Weingart, Collection of Student Loans: A Critical Examination, 20 Wash. & Lee J. Civil Rts. & Soc. Just. 215, 241 (2014). At this time, the Court is unable to ascertain based on the facts alleged whether Ms. Adams paid additional fees for her default in 2012, and if so, whether she received any of those fees in her 2014 reimbursement.