Quero v. Rosenfelt

Background

Christopher Quero, Courtney Francis, and Kellin Rodriguez sued the Secretary of the United States Department of Education for themselves and a proposed class of borrowers who attended Technical Career Institutes, Inc. TCI ceased operations on September 1, 2017. The plaintiffs alleged that the Department of Education improperly failed to provide relief connected to the potential discharge of federal student loans after TCI closed, in violation of the Administrative Procedure Act.

The parties later entered into a settlement agreement, which the court approved on December 17, 2019. The plaintiffs, through the New York Legal Assistance Group, then moved under Federal Rule of Civil Procedure 54(d) and the Equal Access to Justice Act (EAJA) for attorneys’ fees and costs. The opinion notes that Miguel Cardona was automatically substituted for former Acting Secretary Phil Rosenfelt under Rule 25(d).

Report and Recommendation

Magistrate Judge Sarah L. Cave recommended denying the plaintiffs’ request for attorneys’ fees. The plaintiffs timely objected, and the government responded. Judge Daniels reviewed the report, the objections, and the response.

Attorneys’ Fees

The court explained that the EAJA generally requires an award of fees and other expenses to a prevailing party in an action against the United States, unless the government’s position was substantially justified or special circumstances would make an award unjust. The parties did not dispute that the plaintiffs were prevailing parties.

The court nevertheless held that the government’s overall position was substantially justified. That standard does not require the government’s position to be correct; it requires a reasonable basis in law and fact. The court evaluated the government’s position as a whole, including both its conduct before the lawsuit and its position during the litigation, rather than examining each government action separately.

The court agreed that the government reasonably could view the plaintiffs’ case as different from a prior Second Circuit decision involving students at another chain of for-profit schools. The government had not argued that the case was entirely moot because the plaintiffs had received loan discharges, and it had not denied that the plaintiffs were entitled to discharge notices in some form. Although the government’s motion to dismiss was ultimately unsuccessful, the court stated that the unsuccessful result did not determine whether the government’s position was substantially justified for purposes of the EAJA.

The court also held that the government was substantially justified in sending some loan-discharge notices electronically rather than by mail. It relied on the federal Electronic Signatures in Global and National Commerce Act, which can permit electronic records to satisfy writing requirements when specified conditions—including affirmative consumer consent—are met. The court found that Francis and Rodriguez had elected to receive electronic communications. The court also considered that all but one of the eleven loan servicers provided timely notice, while recognizing that Quero did not receive notice until shortly after the complaint was filed. The court concluded that the government’s conduct, considered as a whole, was substantially justified.

The court further agreed that the government reasonably relied on the fact that a regulation requiring second notices was stayed when TCI closed. The later vacatur of that stay did not change whether the government reasonably understood the law at the relevant time.

Costs and Disposition

The EAJA separately permits an award of costs to a prevailing party in an action against the United States or its officers. The government did not dispute that the plaintiffs could receive $400 in costs. The court adopted Magistrate Judge Cave’s report to the extent it denied attorneys’ fees, overruled the plaintiffs’ objections concerning fees, denied the motion as to attorneys’ fees, and granted it as to costs. The plaintiffs were awarded $400, and the clerk was directed to close the motion and the case.