Friday, July 14, 2017

New Sheriff, New Rules? By Jonathan D. Glater


There is a certain irony in the choice of tactics in last week’s lawsuits filed in response to the Education Department’s effort to back away from Obama-era rules that created a process for indebted students to get out of their loan repayment obligations if the institution they attended made false or misleading statements.  The 19 states that filed a federal lawsuit in Washington, D.C., are making the same kind of argument that for-profit higher education providers used in their lawsuit against prior efforts to regulate in this area.

In their complaint, the states, which include Massachusetts, California, and New York, charge that the Department’s effort to postpone implementation of the rules violates the Administrative Procedures Act, or APA. 

(The Department’s move was announced in a press release, and a prior blogpost assessing it is here.  The rules at issue, which were announced in October and were to take effect on July 1, are here.)

While the Department justified the decision to delay implementation of the rules by citing pending litigation filed by the California Association of Private Postsecondary Schools, the states argued in their complaint that not every rule subject to delay had been targeted in the trade group’s lawsuit.

According to the states, the Department’s delay of the rule must itself be subject to notice and comment, like any new rule, and the Department’s failure to do so constitutes a violation of the APA.  Through litigation, the states hope to have a judge order implementation of the rules.

To appreciate the irony, you have to let your mind wander way back to 2011.  That’s when the Association of Private Sector Colleges and Universities sued the Education Department to block implementation of the “gainful employment” rules, which among other things would have imposed penalties on institutions if the ratio of their students’ debt to income exceeded a specified level.  The trade group’s lawsuit succeeded in delaying full implementation of the rules; if you want the gory details, the trial court decision was Association of Private Colleges and Universities v. Duncan, 870 F.Sup. 2d 133 (2012). 

The Department re-developed the rules, which the trade group immediately sued to block.  The new version of the gainful employment rules survived a set of legal challenges by the trade group, culminating in an opinion by the D.C. Circuit Court of Appeals (Association of Private Sector Colleges and Universities v. Duncan, 640 Fed. Appx. 5 (2016)).

The irony arises because in both sets of challenges to those rules, what provision of what law did trade group rely on?  You guessed it:  The same provision of the Administrative Procedures Act. 

The trade group argued that each version of the gainful employment rules was “arbitrary and capricious,” the magic phrase from the Act, which at 5 U.S.C. §706(2) requires a reviewing court to “hold unlawful and set aside agency action, findings, and conclusions found to be… (A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 

The states contend that the delaying of the rules is arbitrary and capricious and otherwise flawed.  So to protect a more recent regulatory effort, the states are using the same tactic that was used to attack a prior one. 

Whether a new sheriff in town can impose new rules will thus depend on whether the courts find that the new sheriff played by the rules.

Higher education | Permalink


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