People of the State of California v. DeVos

Background

These two actions challenged the Department of Education’s 2019 rule rescinding 2014 regulations under Title IV of the Higher Education Act. The 2014 regulations, known as the Gainful Employment Rule, required certain for-profit postsecondary programs to disclose information about debt and earnings and imposed consequences on programs that regularly left low-income graduates with overwhelming debt.

The American Federation of Teachers, the California Federation of Teachers, Isai Baltezar, and Julie Cho alleged that the rescission rule harmed them. Their complaint included a claim that the Department had failed to provide adequate notice and an opportunity for public comment before rescinding the rule’s eligibility framework. California brought a separate claim based on the rule’s disclosure and eligibility provisions.

The defendants initially moved to dismiss both actions for lack of standing, meaning they argued the plaintiffs had not shown the legally required injury connected to the challenged rule or capable of being addressed by the court. The court’s earlier order granted those motions in part and denied them in part. The defendants then sought partial reconsideration of two standing decisions: the decision allowing the American Federation of Teachers plaintiffs’ procedural claim, Count 11, to proceed, and the decision allowing California’s procedural claim to proceed.

American Federation of Teachers Plaintiffs

The court denied reconsideration as to Count 11. The defendants argued that the court had not considered whether the plaintiffs had a sufficiently concrete interest or whether their claim could be remedied. The court noted that the defendants had not raised those arguments in their original motion to dismiss or reply briefing and therefore could not use reconsideration to present arguments that could reasonably have been raised earlier.

The court also concluded that the arguments would not succeed even if considered. It held that the plaintiffs had shown an injury connected to the loss of information about debt-to-earnings rates and program warnings. The court reasoned that this information could have helped members compare programs and avoid programs that might leave students with overwhelming debt. It further concluded that allowing public comment on the information used to rescind the rule could possibly have influenced the Department’s decision, satisfying the requirements for the plaintiffs’ procedural-standing theory.

California’s Claim

The court granted reconsideration as to California’s claim. It rejected the defendants’ argument that California’s challenge could not be evaluated under a procedural-standing analysis, but it agreed that California had not shown the concrete injury required for standing.

California identified possible financial harm, competitive disadvantage, harm to its educational and diversity mission, and the loss of information to students. The court found these theories too speculative. It identified several events that would all have to occur: students would have to reject the affected programs because of information or program designations; seek admission to state institutions; be admitted; choose a California public institution; and benefit California’s finances and educational mission by attending. The court found that none of these events was guaranteed and that the theory depended on independent decisions by third-party students.

The court also rejected California’s reliance on representing its citizens’ interests. It stated that a state generally cannot bring this type of representative lawsuit against the federal government and that the Administrative Procedure Act did not expressly override that principle. The court further found that California had not alleged an actual injury to its public colleges and universities comparable to the injuries recognized in a different case involving an executive order affecting university students, faculty, and researchers.

Disposition

The court ordered that the defendants’ motion for partial reconsideration was GRANTED in part and DENIED in part. Reconsideration was denied as to the American Federation of Teachers plaintiffs’ Count 11. Reconsideration was granted as to California, and the defendants’ motion to dismiss California’s claim was GRANTED without leave to amend. The court stated that the remaining conclusions in its earlier order on the motions to dismiss remained undisturbed. The opinion was signed by United States District Judge Edward J. Davila.