NOAH ZINNER (SBN 247581) - Predatory Student Lending · the Court should now order the Department...

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NOAH ZINNER (SBN 247581) [email protected] MEGUMI TSUTSUI (SBN 299294) [email protected] HOUSING & ECONOMIC RIGHTS ADVOCATES 1814 Franklin Street, Suite 1040 Oakland, CA 94612 Tel.: (510) 271-8443 Fax: (510) 868-4521 EILEEN M. CONNOR (SBN 248856) [email protected] TOBY R. MERRILL (Pro Hac Vice) [email protected] JOSHUA D. ROVENGER (Pro Hac Vice) [email protected] LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL 122 Boylston Street Jamaica Plain, MA 02130 Tel.: (617) 390-3003 Fax: (617) 522-0715 Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MARTIN CALVILLO MANRIQUEZ, JAMAL CORNELIUS, RTHWAN DOBASHI, and JENNIFER CRAIG on behalf of themselves and all others similarly situated, Plaintiffs, v. ELISABETH DEVOS, in her official capacity as Secretary of the United States Department of Education,

) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case Number: C 17-cv-07210-SK PLAINTIFFS’ SUPPLEMENTAL MEMORANDUM IN RESPONSE TO THE COURT’S MAY 25, 2018 ORDER Date: June 4, 2018 Time: 2:30 p.m. Ctrm: Courtroom A, 15th Floor Judge: Sallie Kim Date Filed: May 31, 2018

Case 3:17-cv-07210-SK Document 65 Filed 05/31/18 of 28

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And THE UNITED STATES DEPARTMENT OF EDUCATION, Defendants.

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TABLE OF CONTENTS

I. DOES THE COURT HAVE THE AUTHORITY TO ORDER THE SECRETARY

TO PRODUCE THE THREE DOCUMENTS THAT PLAINTIFFS ALLEGE CONSTITUTE THE CORINTHIAN RULE? ............................................................... 3

II. WHAT IS THE STATUS QUO? WHAT IS THE DATE BY WHICH THE COURT MEASURES THE STATUS QUO? ................................................................................ 8

III. DO PLAINTIFFS CONTEND THAT THE SECRETARY HAS A MANDATORY DUTY TO PROVIDE FORBEARANCE PENDING A DETERMINATION OF THE DISCHARGE AMOUNT? IF SO, WHAT IS THE AUTHORITY FOR THAT POSITION? ..................................................................................................................... 16

IV. SHOULD THE SECRETARY TREAT IN A DIFFERENT MANNER THE BORROWERS WHO WERE NOT ABLE TO COMPLETE A PROGRAM OR RECEIVE A DIPLOMA OR CERTIFICATION ON THE LISTS BECAUSE THE SCHOOL OR PROGRAM CLOSED? IF THE STUDENTS WHO WERE NOT ABLE TO COMPLETE THEIR PROGRAM DID RECVEIVE SOME VALUE, WOULD IT BE ARBITRARY TO TREAT THEM THE SAME (PROVIDE THE SAME DISCHARGE AMOUNT) AS THOSE STUDENTS WHO WERE ABLE TO COMPLETE THEIR PROGRAMS? ........................................................................... 18

V. CONCLUSION ................................................................................................................ 20


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TABLE OF AUTHORITIES

Cases

Aggarao v. MOL Ship Mgmt. Co.,

675 F.3d 355 (4th Cir. 2012) ............................................................................................ 14

American Bioscience v. Thompson,

243 F.3d 579 (D.C. Cir. 2001) ............................................................................................ 4

Animal Defense Council v. Hodel,

840 F.3d 1432 (9th Cir. 1988), ........................................................................................... 5

Animal League Defense Fund (“ALDF”) v. U.S. Dep’t of Agriculture,

2017 WL 2352009 (N.D. Cal. May 31, 2017), ........................................................... 13, 14

Apple, Inc. v. Samsung Elec., Co.,

No. 11-cv-01846, 2011 WL 1938154 (N.D. Cal. May 18, 2011) ...................................... 3

Arcadian Gas Pipeline System v. FERC,

878 F.2d 865 (5th Cir. 1989) ............................................................................................ 10

Ariz. Dream Act Coal. v. Brewer,

757 F.3d 1053 (9th Cir. 2014) ............................................................................ 2, 9, 13, 14

Arkema Inc v. E.P.A.,

618 F.3d 1 (D.C. Cir. 2010) .............................................................................................. 10

Bay Area Addiction Research & Treatment, Inc. v. City of Antioch,

179 F.3d 725 (9th Cir. 1999) ............................................................................................ 14

Bimini Superfast Operations LLC v. Winkowski,

994 F. Supp. 2d 103 (D.D.C. 2014) ................................................................................ 4, 5

Bruno v. Sherman & Howard, LLC,

No. cv-18-00361, 2018 WL 1894707 (D. Az. Feb. 21, 2018) .......................................... 14

Cali. v. Health & Human Servs.,

281 F. Supp. 3d 806 (N.D. Cal. 2017) .............................................................................. 15

Citizens to Preserve Overton Park, Inc. v. Volpe,


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401 U.S. 402 (1971), ........................................................................................................... 4

City of Va. Beach, Va. v. Dep’t of Commerce,

995 F.2d 1247 (4th Cir. 1993) ............................................................................................ 8

Coastal States Gas Corp. v. Dep’t of Energy,

617 F.2d 854 (D.C. Cir. 1980) ............................................................................................ 8

Cort v. Crabtree,

113 F.3d 1081 (9th Cir. 1997) .......................................................................................... 18

Coyotl v. Kelly,

261 F. Supp. 3d 1328 (N.D. Ga. 2017) ............................................................................. 15

Ctr. For Biological Diversity v. U.S. Bureau of Land Mgmt.,

No. C-06-4884-SI, 2007 WL 3049869 (N.D. Cal. Oct. 18, 2007). .................................... 8

Electronic Frontier Foundation v. DOJ,

No. 11-cv-05221, 2014 WL 3945646 (ND Cal Aug. 11, 2014) ......................................... 8

F.C.C. v. Fox Television Stations, Inc.,

556 U.S. 502 (2009) .......................................................................................................... 11

Fund for Animals v. Williams,

391 F. Supp. 2d 191 (D.D.C. 2005) .................................................................................... 7

Guam Contractors Ass’n v. Sessions,

No. 16-cv-00075, 2018 WL 525697 (D. Guam Jan. 24, 2018) ........................................ 13

HSH Nordbank AG N.Y. Branch v. Swerdlow,

259 F.R.D. 64 (S.D.N.Y. 2009) .......................................................................................... 8

In re United States, et. al.,

No. 17-801, 583 U.S. ___ (Dec. 20, 2017) ......................................................................... 4

Inland Empire Public Lands Council v. Glickman,

88 F.3d 698 (9th Cir. 1996). ............................................................................................... 5

Jordan v. DOJ,

591 F.2d 753 (DC Cir 1978) ............................................................................................... 8

Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co.,


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571 F.3d 873 (9th Cir.2009) ............................................................................................... 9

Mercy Medical Skilled Nursing Facility v. Thompson,

No. 99-2765, 2004 WL 3541332 (D.D.C. May 14, 2004) ................................................ 11

NAACP v. Trump,

No. 17-1907, 2018 WL 1920079 (D.D.C. Apr. 28, 2018). ................................................. 2

National Council of la Raza v. DOJ,

411 F.3d 350 (2d Cir. 2005)................................................................................................ 8

New York Times v. DOJ,

756 F.3d 100 (2d Cir. 2014)................................................................................................ 8

People of State of Cal. ex rel. Lockyer v. United States Dep't of Agriculture,

Nos. C05-3508 & C05-4038, 2006 WL 708914 (N.D. Cal. Mar. 16, 2006); ..................... 5

Public Citizen v. Heckler,

653 F. Supp. 1229 (D.D.C. 1986) ....................................................................................... 5

Randolph v. Colvin,

15-cv-1097, 2016 WL 524460 (S.D. Ill. Feb. 10, 2016)................................................... 11

Regents of Univ. of California v. U.S. Dep’t of Homeland Sec.,

279 F.Supp.3d 1011 (N.D. Cal. 2018) .............................................................................. 13

Stanley v. Univ. of S. Cali.,

13 F.3d 1313 (9th Cir. 1994). ........................................................................................... 14

Stuttering Found. Of Am. v. Springer,

498 F. Supp. 2d 203 (D.D.C. 2007) .................................................................................... 4

Thompson v. United States Dep't of Labor,

885 F.2d 551 (9th Cir. 1989). ............................................................................................. 5

U.S. Aid Funds, Inc v. King,

200 F. Supp. 3d 163 (D.D.C. 2016) .................................................................................. 10

U.S. ex rel. Mayman v. Martin Marietta Corp.,

886 F. Supp. 1243 (D. Md. 1995) ....................................................................................... 8

U.S. v. W.R. Grace,


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526 F.3d 499 (9th Cir. 2008) ............................................................................................. 3

Statutes

20 U.S.C. § 1087 ........................................................................................................................... 18

20 U.S.C. § 1091 ............................................................................................................................. 9

Other Authorities

U.S. Dep’t of Justice, Env’t and Nat. Res. Div., Guidance to Federal Agencies on Compiling the

Admin. Record (Jan. 1999) ......................................................................................................... 5

Rules

Civil L.R. 7-3 ................................................................................................................................ 12

Fed. R. Civ. P. 65 ............................................................................................................................ 4

Regulations

34 C.F.R. § 685.214 ...................................................................................................................... 18

34 C.F.R. § 30 ............................................................................................................................... 16

34 C.F.R. § 34.11 .......................................................................................................................... 16


of 21 PLAINTIFFS’ SUPPLEMENTAL MEMORANDUM IN RESPONSE TO THE COURT’S MAY 25, 2018

ORDER. Case No. 17-cv-07210-SK

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There is only one plausible status quo ante: before engaging in its unlawful data

experiment, the Department of Education (“Department”) uniformly and expressly granted full

relief under the Corinthian Rule.1 As the Department’s Office of Federal Student Aid (“FSA”)

stated:

It was the OUS [Office of the Under Secretary], OGC [Office of the General Counsel] and the Special Master who determined in 2015 that “full relief” (defined as full discharge of loans associated with the program at issue with a full refund of amounts paid) was appropriate for Heald, Everest, and WyoTech borrowers with approved Job Placement Rate (JPR) claims.

ECF No. 35-6, Ex. 10 at 31 (“IG Report”). Having enjoined the unlawful Average Earnings Rule,

the Court should now order the Department to again process the borrower defense claims of

proposed class members (“Plaintiffs”) under the Corinthian Rule.

In its May 25, 2018 Order, the Court asked for supplemental briefing on five questions.

Plaintiffs respond as follows: First, while Plaintiffs did not intend to suggest that the three memos

alone “constitute the Corinthian Rule,” since the totality of the record establishes the scope of the

Rule (including, most notably, the Department’s unyielding past practice of granting full relief),

the Court has both the inherent authority and the power under the Federal Rules of Civil Procedure

to order the Secretary to produce any document bearing on the scope of the Corinthian Rule. This

includes, without limitation: the 2015 OGC Memorandum, the Fine Action Letter, the April 2015

Administrative Action & Appeals Services Document, the Approval Memos, see ECF No. 35-6,

Ex. 10 (“IG Report”) at 32, and the Guaranteed Employment Memo and OGC Concurrence re:

Transferability Concurrence Memo, id. n. 18 & 35.

1 Plaintiffs use the term “Corinthian Rule” for consistency with the Court’s May 25 Order, ECF No. 60, but intend for it to have the same meaning as the term “Corinthian Job Placement Rate Rule” used throughout Plaintiffs’ papers.




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Second, irrespective of how the Court handles question one, the status quo is clear: both as

a practical matter that the Department does “not challenge or refute,” ECF No. 60 at 8, and as it

expressly states, the Department unfailingly provided full relief before it adopted the Average

Earnings Rule. Because the Department’s prior policy of providing “full relief” constitutes the

last uncontested status between the parties before the controversy arose, the Corinthian Rule is the

status quo under controlling Ninth Circuit law. Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053,

1061 (9th Cir. 2014). And, contrary to the Court’s suggestion otherwise, ECF No. 60 at 36, it

would be improper to conflate the mandamus standard under 5 U.S.C. § 706(1) — which represents

a separate, independent basis to address “unlawfully withheld or unreasonably delayed” action —

with the Court’s equitable authority to issue an injunction preserving the status quo now that it has

“set aside” the Average Earnings Rule under § 706(2). See, e.g., NAACP v. Trump, No. 17-1907,

2018 WL 1920079, at *24-25 (D.D.C. Apr. 28, 2018).

Third, Plaintiffs are unable to speak to question three as they do not know what scheme the

Department will concoct next.2 Plaintiffs note that it would be improper for the Court to issue an

advisory opinion on the propriety of any proposed plan without further briefing or granting

Plaintiffs leave to amend their complaint to address any hypothetical proposal.

Fourth, the Department has cabined its own discretion and is therefore required to put

Plaintiffs’ loans in forbearance pending the borrower defense discharges. Any change would

represent an unlawful retroactive shift.

2 In question three, the Court asked: “If the Court enjoins the Secretary from using the Average Earnings Rule and the Secretary does not return to the Corinthian Rule, what steps will the Secretary take to assess claims from Plaintiffs?” ECF No. 60 at 38.




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Finally, any borrower unable to complete a program because of Corinthian’s closure is

eligible for a closed school discharge. But, the Court’s fifth question highlights yet another way

the Average Earnings Rule utilizes an irrational formula.

I. DOES THE COURT HAVE THE AUTHORITY TO ORDER THE SECRETARY TO PRODUCE THE THREE DOCUMENTS THAT PLAINTIFFS ALLEGE CONSTITUTE THE CORINTHIAN RULE?

The Court has the authority to order the Secretary to produce all documents bearing on the

Corinthian Rule. Plaintiffs pause to note that they did not mean to suggest that any one document

or set of documents “constitute the Corinthian Rule,” ECF No. 60 at 37. In their Amended

Complaint, Plaintiffs stated that “the legal basis for the Corinthian Job Placement Rate Rule is

codified in legal memoranda written, approved, and relied upon by the Department, including,

without limitation,” the three memos highlighted by the Court. ECF No. 58 at p. 18, ¶ 80 (emphasis

added). The Inspector General Report pointed to these three documents, but also indicated the

existence of other, relevant documents. ECF No. 35-6, Ex. 10. Plaintiffs did not mean to imply,

and do not believe, that these three documents themselves, exclusive of the Department’s other

statements, other documents, and past practice, constitute the Corinthian Rule. Infra p. 9-12

(detailing the contours of the status quo).

In any event, the Court has the inherent authority to enter an order necessary to facilitate

its case administration. See U.S. v. W.R. Grace, 526 F.3d 499, 509 (9th Cir. 2008) (en banc)

(concluding that a court had inherent authority to order disclosure of a witness list and stating “a

district court has the authority to enter pretrial case management and discovery orders designed to

ensure that the relevant issues to be tried are identified…”). Further, District Courts often issue

expedited discovery orders in relation to motions for preliminary injunction (which in the APA

context, would constitute production of all or part of the administrative record). See, e.g., Apple,




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Inc. v. Samsung Elec., Co., No. 11-cv-01846, 2011 WL 1938154 at *1-2 (N.D. Cal. May 18, 2011)

(order discussing good cause standard for issuing expedited discovery orders in context of party

seeking or likely to seek an immediate injunction). And, the Court has authority under Fed. R.

Civ. P. 65(a)(2) to consolidate a preliminary injunction motion with a “trial;” in an APA case, the

“trial” is summary judgment briefing on the basis of the administrative record. See, e.g., Stuttering

Found. of Am. v. Springer, 498 F. Supp. 2d 203, 204 (D.D.C. 2007) (converting preliminary

injunction motion into summary judgment briefing on the basis of the administrative record). At

bottom, there is no question that the Court has the authority to order production of documents that

are relevant to contested agency action, see, e.g. Bimini Superfast Operations LLC v. Winkowski,

994 F. Supp. 2d 103-04 (D.D.C. 2014) (noting that the Court requested the administrative record

“in order to more fully evaluate Plaintiffs’ motion for preliminary injunction and Defendants’

motion to dismiss or, in the alternative, summary judgment”); Am. Health Care Ass. v. Burwell,

217 F. 3d Supp. 921, 931 (N.D. Miss. 2016), and if such documents are needed for the Court to

fully decide the preliminary injunction motion, it would be error to not “call[] for the administrative

record,” Am. Bioscience v. Thompson, 243 F.3d 579, 582 (D.C. Cir. 2001).3

Furthermore, the Court can order production of any document evidencing the Corinthian

Rule because they will all be part of the properly constituted administrative record. Judicial review

in an APA case is limited to records that were before the agency at the time of the decision, Citizens

to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 419-20 (1971), and thus the administrative

3 This is not a situation like In re United States, et. al., No. 17-801, 138 S.Ct. 443 (Dec. 20, 2017), in which the Supreme Court halted an overly broad production order to permit the District Court to first “rule on the Government’s threshold arguments.” 138 S.Ct. at 445. Here, the Court has already ruled on the Government’s threshold argument regarding final agency action and the production would be narrow and relevant to the full resolution of Plaintiffs’ motion.




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record “consists of all documents and materials directly or indirectly considered by agency

decision-makers and includes evidence contrary to the agency’s position,” Thompson v. United

States Dep't of Labor, 885 F.2d 551, 555–56 (9th Cir. 1989). It also includes documents that were

considered and relied upon by subordinates who provided recommendations to the decision-maker.

People of State of Cal. ex rel. Lockyer v. United States Dep't of Agriculture, Nos. C05-3508 &

C05-4038, 2006 WL 708914, at *2 (N.D. Cal. Mar. 16, 2006); see also U.S. Dep’t of Justice, Env’t

and Nat. Res. Div., Guidance to Federal Agencies on Compiling the Admin. Record (Jan. 1999);

Bimini Superfast Operations, 994 F. Supp. 2d at 104-06 (INS opinions and field manuals properly

included in administrative record); Public Citizen v. Heckler, 653 F. Supp. 1229, 1237 (D.D.C.

1986) (internal memorandum from FDA and CDC properly included in record). Moreover, the

record may be supplemented if needed to “explain agency actions,” Animal Defense Council v.

Hodel, 840 F.2d 1432, 1436 (9th Cir. 1988), such as “when the agency has relied on documents

not in the record,” Inland Empire Public Lands Council v. Glickman, 88 F.3d 697, 703 (9th Cir.

1996).

Here, at least three sets of documents are relevant to the Corinthian Rule’s remedy and will

be included in the properly constituted administrative record.4 First, there is no question that the

memorandum prepared by the Office of General Counsel, the fine action letter prepared by FSA’s

Administrative Actions & Appeals Service Group,5 and an April 2015 documented prepared by

the FSA’s Administrative Actions & Appeals Services Groups, served (at least in part) as the

4 These various documents will also likely be relevant to the substance of Plaintiffs’ claims, including their retroactivity, abandonment, and arbitrary and capricious counts. 5 Assuming that the Inspector General Report is referencing the same document, the Fine Action Letter may already be in the record and appears to have served as the basis of the Department’s factual findings regarding Heald’s misrepresented job placement rates. ECF No. 35-5 at Ex. 4.




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framework for, and evidence of, the Corinthian Rule. Indeed, page ten of the Inspector General

Report states that these documents “supported a cause of action under applicable State law and

thus qualified a borrower for a loan discharge” under the job placement rate “category[] of

borrower defense claims.” ECF No. 35-6, Ex. 10 at 10; see also id. at 31 (“Enforcement unit

continued the review of JPR claims under the previously established framework”); id. at 7 (“[I]n

addition to continuing to process discharged under the memorandum developed prior to the

creation of BDU [(Borrower Defense Unit)]…”); id. at 8 (“BDU and its contractors reviewed

claims for eligibility using criteria established in legal memoranda as the basis for approval. BDU

and its contractors made claim determinations and performed quality control reviews on the

claims. Then BDU recommended claims for approval and associated loans for discharge to the

Under Secretary. The Undersecretary approved the list of claims, and Business Operations notified

loan servicers to discharge the borrowers’ loans associated with the approved claims.”).

The Inspector General Report also references “Approval Memos” as further evidencing the

scope of the Corinthian Rule. See id. at 32 (“Enforcement’s concurrence with OGC’s legal

conclusions is documented in the Approval Memos”). In fact, FSA specifically notes that it

documented the amount of relief under the job placement rate claims “in the Approval Memos.”

Id. at 35; id. (“OGC established the legal framework, review criteria and legal basis for relief for

both the Heald and Everest/Wyotech JPR claims . . . Enforcement documented its concurrence in

each of the Approval Memos that it submitted based on the previously established legal

framework, review criteria and legal basis for relief for the JPR claims”); id. at 31, n. 17 (“The

Report suggests that OIG misunderstood the legal memoranda approval process to require that

OUS sign any legal memorandum that provided the legal framework to approve a particular type




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of claim. That was not the process. OUS’s approval is found on the claim “Approval Memos,” not

on the legal memoranda”).

And, the Inspector General’s report states that additional memos (specifically the BDU’s

January 2017 Guaranteed Employment Memo and OGC’s concurrence with two October 2016

BDU Transferability of Credits Memos) incorporate aspects of the Corinthian Rule and/or reflect

the Department’s understanding of “the amount of relief for all job placement rate

misrepresentation claims.” Id. at 35.6 FSA cites to these two memos to support its statement that:

“BD attorneys continued review of JPR claims under the same review criteria, legal framework,

and relief previously established by OUS, OGC, and the special master. Enforcement agreed with

OGC’s legal conclusion that: 1) borrowers who met the criteria required in the Heald and

Everest/Wyotech attestation forms were eligible for borrower defense discharges; and 2) that full

relief was appropriate.” Id. at 32 n.18. FSA further explained that the documentation of the

“amount of relief for all job placement rate misrepresentation claims . . . is reflected in the

Corinthian Guaranteed Employment memo.” Id. at 35. Therefore, these memos either expressly

detail the remedy for the Corinthian Rule, or mirror the same process that was used to craft that

6 There are additional memos regarding American Career Institute (a January 2017 BDU memo) and ITT (a January 2017 BDU memo) that Plaintiffs understand detail the Department’s analysis of borrower defense claims under the MCPA and California law respectively (and thus speak to the Department’s long-standing interpretation of the borrower defense regulation as requiring the remedy to be determined under state law), and that expressly reference the approach adopted for Corinthian (and thus further shed light on the scope of the Corinthian Rule). Cf. ECF No. 35-6, Ex. 10 at 10; ECF No. 35-7, Ex. 16 (ACI Press Release). Given this, the Court should consider ordering release of those memos, and all documents that evidence, reference, or discuss the relief provided for Job Placement Rate claims.




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Rule’s remedy. id. at 32 n.18. They thus reflect the Department’s decision-making and will be

part of the administrative record.7

II. WHAT IS THE STATUS QUO? WHAT IS THE DATE BY WHICH THE COURT MEASURES THE STATUS QUO?

Under controlling Ninth Circuit law, the court looks to the “last uncontested status”

between the parties to determine the status quo, rather than the time the complaint was filed.

Indeed, the Ninth Circuit has stated — on multiple occasions — that the status quo constitutes the

“last uncontested status” between the parties “preceed[ing] the pending controversy.” N.D. ex rel.

Parents v. Haw. Dep't of Educ., 600 F.3d 1104, 1112 n.6 (9th Cir. 2010). Put differently, the status

quo refers to the “legally relevant relationship between the parties before the controversy arose.”

Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053, 1061 (9th Cir. 2014); see also Marlyn

Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 879 (9th Cir. 2009) (citation

omitted) (status quo means “the last, uncontested status which preceded the pending controversy”).

7 Plaintiffs cannot respond to any hypothetical privilege argument that the Department may raise in an attempt to avoid including relevant, but unfavorable material in the administrative record. See Fund for Animals v. Williams, 391 F. Supp. 2d 191, 197 (D.D.C. 2005) (“The agency may not skew the record in its favor by excluding pertinent but unfavorable information.”) (citation omitted); see also Ctr. For Biological Diversity v. U.S. Bureau of Land Mgmt., No. C-06-4884-SI, 2007 WL 3049869, at *4 (N.D. Cal. Oct. 18, 2007). As a general matter though, the documents are unlikely to be privileged because they appear to constitute working law of the agency. National Council of la Raza v. DOJ, 411 F.3d 350 (2d Cir. 2005); see also, Electronic Frontier Foundation v. DOJ, No. 11-cv-05221, 2014 WL 3945646 at *7-8 (N.D. Cal Aug. 11, 2014); Jordan v. DOJ, 591 F.2d 753 (D.C. Cir 1978); cf. New York Times v. DOJ, 756 F.3d 100, 116 (2d Cir. 2014). And, given that these documents were both referenced and discussed in the OIG report, the Department arguably waived any privilege by selectively disclosing their contents. See City of Va. Beach, Va. v. Dep’t of Commerce, 995 F.2d 1247, 1253 (4th Cir. 1993); Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980); HSH Nordbank AG N.Y. Branch v. Swerdlow, 259 F.R.D. 64, 74 (S.D.N.Y. 2009); U.S. ex rel. Mayman v. Martin Marietta Corp., 886 F. Supp. 1243, 1252 (D. Md. 1995). At a minimum, Plaintiffs request an opportunity to be heard on any privilege claims, and in camera review may ultimately be appropriate.




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There is no dispute that, as a practical matter, the Department granted every applicant who

attended a school on the List a full discharge before January 20, 2017. Nobody disagrees that at

some point after January 20, 2017, the Department adopted the Average Earnings Rule to replace

that past practice.8 The Court has found that Plaintiffs are entitled to a decision on their borrower

defense claim after submitting their attestation form, ECF No. 60 at 23-24, and there are only two

historical ways that the Department has fulfilled this duty: the distinct “before” (the Corinthian

Rule) and the “after” (the Average Earnings Rule). Thus, the “controversy” is the departure from

the Corinthian Rule in favor of a policy that violated Plaintiffs’ privacy rights; the last “uncontested

status” is the processing of claims under the Corinthian Rule.9

The parameters of the status quo are also clear on this record. The Department was

granting full relief (defined as 100% discharge, return of money owed, repair of credit, and

restoration of eligibility of loans10) under the Corinthian Rule. Specifically:

It is incorrect to say that the Rule was not “stated policy,” ECF No. 60 at 37, or that there was “no public statement of any kind indicating that borrowers would receive full

8 We do know that a review panel was assembled in the “winter and spring of 2017,” ECF No. 42-1 at ¶ 7, and that the Office of the CFO was tasked in May 2017 to assist FSA evaluate borrower defense procedures, ECF No. 42-2 at ¶ 5. 9 The government cannot argue that the status quo was some gap between the abandonment of the Corinthian Rule and the adoption of the Average Earnings Rule, or that the status quo is otherwise some period of stasis or study. Indeed, that argument would subject the Department to an unlawful withholding violation under the APA. See 5 U.S.C. § 555(b) (“[W]ithin a reasonable time, each agency shall proceed to conclude a matter presented to it”); § 706(1). Given Plaintiffs’ property interest in some relief, the Department is under an obligation to process the attestation forms in some manner. Simply put, the Court cannot order a return to an unlawful (and contested) period of delay. For the same reasons, the Department’s answer to Question Three, cannot be “do nothing” or “study further.” 10 Restoration of eligibility for student loans happens by operation of statute because Plaintiffs would no longer be in default on any loan (because it would be discharged), absent the presence of other (non-Corinthian Rule) loans that were in default. See 20 U.S.C. § 1091(a)(3) (restricting eligibility for federal financial aid programs to those “not…in default on any loan…made, insured, or guaranteed by the Secretary under this subchapter”).




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discharge of loans or full refunds of loans,” id. at 26, n.4. The Department expressly stated that: “It was the OUS [Office of the Under Secretary], OGC [Office of the General Counsel] and the Special Master who determined in 2015 that “full relief” (defined as full discharge of loans associated with the program at issue with a full refund of amounts paid) was appropriate for Heald, Everest, and WyoTech borrowers with approved Job Placement Rate (JPR) claims.” ECF No. 35-6, Ex. 10 at 31 (emphasis added).

Similarly, the Department stated: “BD attorneys continued review of JPR claims under the same review criteria, legal framework, and relief previously established by OUS, OGC and the Special Master. Enforcement agreed with OGC’s legal conclusions that: 1) borrowers who met the criteria required in the Heald and Everest/WyoTech attestation forms were eligible for borrower defense discharges; and 2) that full relief was appropriate.” Id. at 32 (emphasis added).

The Department further noted that “there was not uncertainty regarding OGC’s legal positions on review criteria, legal framework, or relief.” Id. at 32, n. 19. And, FSA stated that “while the [OIG] Report notes that these policies and procedures were not always reduced to writing in formal policy documents, the policies were consistently communicated and understood throughout the borrower defense program.” Id. at 30.

The Department does “not challenge or refute” the evidence that it uniformly granted

full relief to over 25,000 individuals before it adopted the illegal Average Earnings Rule. ECF No. 60 at 8; see also ECF No. 35 at 15; ECF No. 42 at 1 (The Department states that “because [it] determined that [Corinthian] had systematically misrepresented its job placement rates, it began fully discharging student loan debt.”); id. at 8 (The Department concedes that “throughout 2015 and 2016, [it] awarded full discharges of Direct Loan debt to Corinthian borrowers . . . based on [its] findings.”); id. at 30 (The Department notes that borrowers “are no longer eligible for full discharges”) (emphasis added). That past practice, without anything more, establishes the parameters of the Corinthian Rule.11

11 Agency action is not established by the existence (or lack thereof) of a singular written policy. ECF No. 60 at 25 (“the Court is troubled by the fact that there is no document in the record that list or describes the Department’s previous policy”). Such a rule would allow a Department to escape its obligations under the APA by simply saying “we did not write the prior policy down in full, so it did not exist.” This is why courts often look to past practice alone to determine the scope and existence of an agency’s policy. See, e.g., Arkema Inc v. E.P.A., 618 F.3d 1, 7-8 (D.C. Cir. 2010); Arcadian Gas Pipeline System v. FERC, 878 F.2d 865, 868-69 (5th Cir. 1989); U.S. Aid Funds, Inc v. King, 200 F. Supp. 3d 163, 171-72 (D.D.C. 2016); Randolph v. Colvin, 15-cv-1097, 2016 WL 524460 at *4 (S.D. Ill. Feb. 10, 2016); Mercy Medical Skilled Nursing Facility v. Thompson, No. 99-2765, 2004 WL 3541332, at *3 (D.D.C. May 14, 2004).




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In his Third Report, the Special Master expressly noted that full relief was proper when he stated that, as of December 31, 2015, 546 borrower claims for Heald were recommended for “full relief (including restitution of all amounts paid)” and that “the Under Secretary has authorized such relief and those discharges are in process.” ECF No. 35-7, Ex. 13 at 5. Similarly, the Special Master stated for Everest and WyoTech that there were 190 borrower claims that were ready for “full relief (including restitution of all amounts paid)” and that such relief had been “authorized.” Id. at 6.

The Department’s own evidence submitted in opposition to Plaintiffs’ motion

acknowledges that the past policy mandated full relief. Under Secretary Manning testified: “[W]e found that the previous approvals had been based on the assumption that CCI borrowers received a worthless education and therefore that the discharge of the total amount of borrowers’ loans and reimbursement of all payments was appropriate for all CCI borrowers with valid claims.” ECF No. 42-1 at p. 5 ¶ 9 (emphasis added).12

California, Massachusetts, Illinois, and Maryland extensively worked with the

Department to implement the Corinthian Rule and described their first-hand observations that: “The submission of a completed claim form was the only step a qualified borrower needed to take to obtain a complete loan cancellation and refund of all amounts paid,” and “[p]rior to January 20, 2017, with critical assistance from state attorneys general, the Department granted approximately 28,000 borrower-defense claims from Corinthian students. The Department cancelled the entirety of these borrowers’ loans and refunded to them all amounts paid to Corinthian.” ECF No. 46-1 at 4-5.

The Department released various press releases, including one that states: “[T]he

Department has determined that students who relied on misrepresentations found in published job placement rates . . . qualify to have their federal student loans discharged. Students can have their loans forgiven and receive refunds for amounts paid based on a simple attestation.” ECF No. 35-7, Ex. 22 at 3 (emphasis added).

12 To the extent the Department argues that the Corinthian Rule was not a Rule and, in any event, was predicated merely on an “assumption” respecting the value of a Corinthian education, the Average Earning Rules rests on a mischaracterization of the prior policy from which it is departing. Therefore, even assuming, arguendo, that the Average Earnings Rule is rational, the administrative record (including the documents discussed earlier) will likely show that the Department’s conduct is still arbitrary and capricious because it has not “forthrightly acknowledged” its past policy or its change in policy. F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 517 (2009).




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Additional evidence abounds, and includes:

In a blog post on July 27, 2016 (that was also posted to Facebook to reach more student borrowers), the Department stated: “The U.S. Department of Education is committed to forgiving the federal student loans of eligible former Heald College students. If you qualify for forgiveness, you will not be required to pay back your qualifying Heald federal student loans and you may be refunded any amount that you already paid. You may be eligible if you attended Heald when it closed, or if you were misled or defrauded by Heald.” Dep’t of Educ., How to Apply for Student Loan Forgiveness if You Attended Heald College, available at: https://perma.cc/W3VP-VXLQ (emphasis added).

As part of the Department’s “Facebook ad pilot designed to test whether social media

is an effective means of reaching borrowers,” ECF No. 35-7, Ex. 15 at 6, the Department told a borrower: “If you qualify for forgiveness, you will not be required to pay back your qualifying Heald federal student loans and you may be refunded any amount that you already paid.” Available at https://www.facebook.com/FederalStudentAid/posts/1067179450029853 and https://perma.cc/7MLG-7ANG.

The decision letters that were sent to individuals whose claims were processed under the Corinthian Rule indicate that: “ED has determined that your claim meets the requirements of a successful borrower defense claim because the acts or omissions of a school you attended would give rise to a cause of action under state law. Accordingly, the federal student loans you received for the programs of study related to those acts or omissions have now been discharged. . . . Within 60-90 days of this notification, we will notify credit reporting agencies of the discharge of these loans, and ask that they remove any negative credit status that were previously reported based on the discharged loans above.” Decl. of Joshua D. Rovenger (“Rovenger”), Great Lakes May 11, 2016, Discharge Letter (Ex. 1) (emphasis added); see Fedloan Servicing Jan. 31, 2017, Discharge Letter (Ex. 2); Navient Jan. 5, 2017, Discharge Letter (Ex. 3); FSA Dec. 8, 2015 Borrower Defense to Repayment Letters (Exs. 4 & 5); see also FSA Jan. 11, 2017 Borrower Defense Claim e-mail (Ex. 6); Jan. 12, 2017 Borrower Defense Claim e-mails (Exs. 7 & 8).13

13 The Department’s two-decade long interpretation of the borrower defense regulation tethering the borrower defense remedy to the state law cause of action shows how the Department calculated the remedy under the Corinthian Rule. Plaintiffs established that longstanding interpretation through various Department memorandums. See ECF No. 35-8, Exs. 24, 31, 33, & 34. The Department did not—and could not — object to their authenticity. See Civil L.R. 7-3 (a) (“[a]ny evidentiary and procedural objections to the motion must be contained within the brief or




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To the extent that Animal League Defense Fund (“ALDF”) v. U.S. Dep’t of Agriculture,

2017 WL 2352009, *3 (N.D. Cal. May 31, 2017), determines the status quo by looking to

conditions operative as of the date of the filing of the complaint, it cannot be reconciled with Ninth

Circuit case law. Indeed, it is inconsistent with Brewer’s holding (a case that ALDF does not even

mention) that the status quo refers to the “legally relevant relationship between the parties before

the controversy arose.” And, though ALDF cites N.D. ex rel. Parents v. Haw. Dep’t of Educ., 600

F.3d 1104, 1112 n.6 (9th Cir. 2010), ALDF cannot be reconciled with that decision’s statement

that characterizes the status quo as the “last uncontested status which preceded the pending

controversy.”

Other courts in this circuit have correctly followed binding law and have bypassed ALDF’s

incorrect holding. See, e.g., Regents of Univ. of California v. U.S. Dep’t of Homeland Sec., 279

F.Supp.3d 1011, 1048 (N.D. Cal. 2018) (issuing prohibitory injunction to restore status quo prior

to the filing of the complaint); id. at 1048, n.20 (“The relevant status quo is the legally relevant

relationship between the parties before the controversy arose.”) (citing Brewer I, 757 F.3d at 1060);

Guam Contractors Ass’n v. Sessions, No. 16-cv-00075, 2018 WL 525697, at *10-11 (D. Guam

Jan. 24, 2018) (where “one party affirmatively chang[es] the status quo and a responding party

seek[s] to restore it,” “the preliminary relief sought is appropriately characterized as prohibitory”)

(citing Brewer I, 757 F.3d at 1061); see also Bruno v. Sherman & Howard, LLC, No. cv-18-00361,

memorandum”). Unless the administrative record acknowledges this prior interpretation, and explains the Department’s changed view, this is a further reason why the Average Earnings Rule must be set aside under the APA.




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2018 WL 1894707 at *1, n.2 (D. Az. Feb. 21, 2018) (citing Brewer I’s definition of the status

quo).14

Even assuming that the Court were persuaded by ALDF, the status quo here would still be

the Corinthian rule. At the time of the filing of the complaint, the Department had only ever

provided relief under the Corinthian Rule. And, as the Court indicated in its opinion, “Plaintiffs

do have a property interest in “some” relief once they establish their borrower defense,” “Plaintiffs,

once they establish their claims for relief under the borrower defense rule by completing the

attestation forms, have a mandatory right to some relief,” and Plaintiffs “have a mandatory right

to be notified about the amount of the relief they are receiving.” ECF No. 60 at 23-24. Given

these rights, the Department must have some policy that governs Plaintiffs’ claims; the status quo

cannot be nothing. This distinguishes it from a case like Stanley v. University of Southern

California, a case cited in ALDF. In Stanley, the Ninth Circuit stated that a requested injunction

to restore the plaintiff as an employee at USC, at a salary that she had never before earned, when

she was not even still an employee at the time the lawsuit was filed, “would not have maintained

the status quo.” 13 F.3d 1313, 1320 (9th Cir. 1994). Here, however, the only policy the

Department was ever employing with respect to Plaintiffs was the Corinthian Rule.

14 ALDF’s rationale is also illogical as it immunizes unanticipated government action from being preliminarily enjoined, no matter how illegal, and no matter how severe and irreparable the harm. Contra Brewer, 757 F.3d at 1061; Bay Area Addiction Research & Treatment, Inc. v. City of Antioch, 179 F.3d 725, 732 (9th Cir. 1999) (issuing prohibitory, not mandatory, injunction to restore status quo prior to city’s adoption of an ordinance); see also Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 378 (4th Cir. 2012) (requiring a party who has “recently disturbed the status quo to reverse its actions … restores, rather than disturbs, the status quo ante”) (internal citations omitted).




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Critically, the Court should not conflate an order requiring a return to this status quo — as

is being requested — with mandamus (or a 706(1) APA claim).15 ECF No. 60 at 36 (“At this time,

the Court cannot compel the Secretary to return to the Corinthian Rule, since the parameters of the

Corinthian Rule are not clearly defined. See Norton v. Southern Utah Wilderness Alliance, 542

U.S. 55, 64 (2004) (court can compel agency action “only where a plaintiff asserts that an agency

failed to take a discrete agency action that it required to take.”)”). The two are not the same. For

example, in NAACP v. Trump, the District Court concluded, like here, that the government’s new

policy was unlawful under § 706(2) of the APA. 2018 WL 1920079 at 24-25. At that point, the

Court did not ask whether it would then be empowered to issue an order requiring the reinstatement

of DACA under § 706(1). Instead, it concluded that the original DACA program was the status

quo and that, having found the change to the new policy unlawful, it was empowered to issue an

injunction requiring the government to return to that prior policy. Id; see also Cali. v. Health &

Human Servs., 281 F. Supp. 3d 806, 832 (N.D. Cal. 2017) (finding violation of the procedural

requirements of APA and then ordering the “reinste[ment]” of “the regime in place” without

reference to § 706(1) standards”); Coyotl v. Kelly, 261 F. Supp. 3d 1328, 1344 (N.D. Ga. 2017)

(finding violation of § 706(2) for specific DACA recipient, ordering the government to return to

status quo of adjudicating individual’s claims under prior standard, and not discussing or

referencing § 706(1) standards). Put another way, the Court does not need to find a mandatory

15 To be sure, Plaintiffs allege an independent § 706(1) claim on the basis of the Department’s unlawful withholding and delay under the Corinthian Rule. But, this is distinct from Plaintiffs’ § 706(2) claim based on violations of the Privacy Act, and the appropriate relief that would flow from that § 706(2) violation.




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duty on the part of the Department in order to require the Department to return to the status quo of

processing claims under the Corinthian Rule.16

III. DO PLAINTIFFS CONTEND THAT THE SECRETARY HAS A MANDATORY DUTY TO PROVIDE FORBEARANCE PENDING A DETERMINATION OF THE DISCHARGE AMOUNT? IF SO, WHAT IS THE AUTHORITY FOR THAT POSITION? Yes, Plaintiffs maintain that the Secretary has cabined her discretion on this issue and now

has a mandatory duty to place Plaintiffs’ loans in forbearance pending the borrower defense

discharges.

Although there is no regulatory requirement expressly on point,17 the Secretary has already

determined that Plaintiffs’ loans would be placed into forbearance. By way of example:

16 Even if the court views Plaintiffs’ request as one for a mandatory injunction, Plaintiffs satisfy the mandatory injunction standard, because the illegality is clear and the harm is irreparable. Marlyn Nutraceuticals, 571 F.3d at 879 (discussing mandatory injunction standard). As the Court found, “it is undisputed that the Department . . . did not comply with the requirements [for matching programs] and thus violated the Privacy Act.” ECF No. 60 at 20. Further, the Court found that Plaintiffs are experiencing “emotional distress,” id. at 31, “irreparable harm in the form of economic harm,” because of “the dire financial circumstances that Plaintiffs describe,” id. at 33, and lost “opportunities similar to the type the Court in Brewer found to constitute irreparable injury,” id. at 34. The record also includes expert declarations that buttress the Court’s findings, which the Court may appropriately consider. Civil L.R. 7-3(c) expressly provides for the inclusion of declarations in “any reply to an opposition.” The rules further grant the opposing party the right, without leave, to file an Objection to Reply Evidence within 7 days. Civil L.R. 7-3(d)(1). The Department did not object to inclusion of Plaintiffs’ expert declarations in the record before the Court. Further, the two declarants were experts in how “educational and social inequities influence health and health disparities across the life course,” ECF No. 48-2 at 3 (Walsemann Decl.) and “economics,” including “the ways in which students pay for higher education and how government policies related to higher education financing can impact educational outcomes,” ECF No. 48-3 at 2-3 (Gicheva Decl.). The validity of their conclusions does not rest on an examination of Plaintiffs. 17 Authority does preclude the Department from coercively collecting any loans while an objection to their validity is pending, regardless of whether a Plaintiff requested a forbearance. See 34 C.F.R. § 34.11(b-d); 34 C.F.R. § 30.22-28. As such, an individual with a pending borrower defense application cannot be subject to coerced collection in the form of administrative wage garnishment or Treasury offset.




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In the attestation form, the Secretary stated: “By completing this form, you are eligible to have all of your federal loans placed into forbearance and for any collections on any federal loans in default to stop while your claim is reviewed by the Department of Education . . . During any period that your loans are in forbearance, you do not have to make payments on those loans, and the loans will not go into default . . .this will continue until the loan discharge review process is completed. . . The forbearance or stopped collections will affect all of a borrower’s federal loans, including loans that are not eligible for discharge through this form, such as Federal Family Education Loans (FFEL), loans taken out to attend a Heald College program not on the enclosed list of covered programs, or loans taken out to attend another institution.” ECF No. 35-6, Ex. 8 at 3; ECF No. 35-6, Ex. 9 at 3.

“Corinthian students who believe they were defrauded by their school and intend to submit claims based on borrower defense can request that their federally serviced loans be placed into forbearance for twelve months while their claim is reviewed. If those loans are in default, they can request that collection activities be stopped… as a result, the burden to the borrower of continuing to make payments on these loans or facing collection activities is relieved while the Department establishes its processes and claims are reviewed.” ECF No. 35-7, Ex. 11 at 6.

“All former CCI borrowers who have filed, or plan to file, an application for

borrower defense will have the opportunity to enter forbearance while they submit their applications and the Department reviews their claim.” ECF No. 35-7, Ex. 12 at 3.

“All former Corinthian students who apply for borrower defense have the option of having their federal loans immediately placed into forbearance.” ECF No. 35-7, Ex. 22.

“Business operations created a spreadsheet for each loan servicer that contained claimants’ loan information o that the loan servicers could place the claimant’s loans into forbearance whereby no collections would be pursued and no payments would be due for 12 months. If the borrower defense loan discharge process took longer than 10 or 11 months for claimants, Business Operations created a spreadsheet for each loan servicer with the claimant’ loan information and requested a 12 month extension to the forbearance.” ECF No. 35-6 Ex. 10 at 12-13

“The forbearance applied when a borrower files a borrower defense claim is non-

capitalizing.” Id. at 34.

“Once a claim is submitted and processed through intake, borrowers’ loans are placed in forbearance or stopped collections until their claim is resolved, unless they opt-out.” ECF No. 35-8, Ex. 17 at 2.




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“There is a process in place to extend forbearance if the claim has not been decided.” ECF No. 35-8, Ex. 20 at 2.

This is a mandatory duty because, like in Cort v. Crabtree, the Department has already

determined that these individuals are eligible for this form of relief. 113 F.3d 1081 (9th Cir. 1997);

see also ECF No. 35 at 28-29. The Department placed no strings on this eligibility and made clear

that the forbearance would last until the discharge decision was rendered. And, like in Cort, the

Department’s initial “discretion” is “irrelevant to whether” the Department has already

“determined that” individuals “were eligible for such discretionary” relief. Id. Having cabined its

own discretion, and granted Plaintiffs this form of relief, the Department may not now retroactively

alter that determination.

IV. SHOULD THE SECRETARY TREAT IN A DIFFERENT MANNER THE BORROWERS WHO WERE NOT ABLE TO COMPLETE A PROGRAM OR RECEIVE A DIPLOMA OR CERTIFICATION ON THE LISTS BECAUSE THE SCHOOL OR PROGRAM CLOSED? IF THE STUDENTS WHO WERE NOT ABLE TO COMPLETE THEIR PROGRAM DID RECVEIVE SOME VALUE, WOULD IT BE ARBITRARY TO TREAT THEM THE SAME (PROVIDE THE SAME DISCHARGE AMOUNT) AS THOSE STUDENTS WHO WERE ABLE TO COMPLETE THEIR PROGRAMS?

A borrower who was unable to complete a program because of Corinthian’s closure, or

who withdrew from the school on or after June 20, 2014, is eligible for complete loan cancellation

under a separate statutory discharge provision. See 20 U.S.C. § 1087(c); 34 C.F.R. § 685.214(a &

b); see also ECF No. 35-8, Ex. 22 (extending 120-day discharge window to June 20, 2014).

Assuming that the discharges were properly granted, there would be no additional relief needed.

In any event, Plaintiffs believe that this question highlights yet another way in which the

Average Earnings Rule’s reliance on unjustifiable data comparisons to calculate relief makes it

arbitrary. A student who withdrew from school on June 21, 2014 would receive full relief under




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a closed school discharge. A student who withdrew from the same program one day earlier would

likely receive a partial denial under the Average Earnings Rule. In other words, a student who

attended a Corinthian campus that closed days before she completed her program would receive

full relief through a closed school discharge, while a student that was prematurely handed a

certificate only days before his school’s closure, such as Plaintiff Jamal Cornelius, ECF No. 35-2,

¶ 10, is eligible only for a partial discharge.

The Court’s question also shows a further flaw in the Average Earning Rule. In its formula,

ED cobbled together borrowers who applied for cancellation, regardless of when and where they

attended a Corinthian program, and regardless of whether they completed or not, into “CIP

Program/Credential Group[s],” whereas the comparison GE data solely consist of individuals

attending in 2014 and include only individuals who completed the program, regardless of whether

they applied for loan cancellation or not. Defs’ Opp., Ex. B at 18; ECF No. 35-5 (Ex. 4); ECF

No. 35-7 (Ex. 7). It thus is yet another way in which this does not truly reflect an “apples to apples”

comparison and is an illogical means of assessing “value.”

And, of course, those who complete their program received the exact same value as

someone who did not: nothing. As the Department’s own investigations into Corinthian show,

assigning any sort of “value” to a Corinthian “education” is arbitrary. See ECF No. 35-1 (Craig

Decl.) at p. 4, ¶¶ 18-19 (“Although the Everest College recruiters told me that I would be able to

find a job . . . I have not been able to . . . Since Everest College only provided me with a one-month

internship during my time there, I could not qualify for these jobs. If I want to work in medical

billing, I will have to go to school for it all over again.”); ECF No. 35-2 (Cornelius Decl.) at p. 2

¶ 11 (“I applied for several jobs in network security but was not able to find one. I never even

received an interview.”); ECF No. 35-3 (Dobashi Decl.) at p.4 ¶ 23 (“It’s unfair because the




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Wyotech program was a complete waste. The school promised I would learn a career, get a job in

it, and make good money, and I realized after I graduated that it was all a lie.”); ECF No. 35-4 at

p.4, ¶ 29 (“I was never able to get a job in the medical assisting field.”).

V. CONCLUSION

As the Department acknowledged in late 2017, the status quo ante is clear: ““full relief”

(defined as full discharge of loans associated with the program at issue with a full refund of

amounts paid) was appropriate for Heald, Everest, and WyoTech borrowers with approved Job

Placement Rate (JPR) claims.” ECF No. 35-6, Ex. 10 at 31. Because the Court has concluded that

the Department’s data adventure violated the law in a manner that is causing Plaintiffs’ irreparable

harm, the Court should order the Department to process Plaintiffs’ claims pursuant to its prior

practice.

Dated: May 31, 2018 Respectfully submitted,

/s Joshua D. Rovenger Noah Zinner Megumi Tsutsui HOUSING & ECONOMIC RIGHTS ADVOCATES PO Box 29435 Oakland, CA 94604 Tel.: (510) 271-8443 Fax: (510) 280-2448 Eileen M. Connor Toby R. Merrill Joshua D. Rovenger LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL 122 Boylston Street Jamaica Plain, MA 02130




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Tel.: (617) 390-3003 Fax: (617) 522-0715 Attorneys for Plaintiffs


of 3 DECLARATION OF JOSHUA D. ROVENGER IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL

MEMORANDUM Case No. 17-cv-07210-SK

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NOAH ZINNER (SBN 247581) [email protected] MEGUMI TSUTSUI (SBN 299294) [email protected] HOUSING & ECONOMIC RIGHTS ADVOCATES 1814 Franklin Street, Suite 1040 Oakland, CA 94612 Tel.: (510) 271-8443 Fax: (510) 868-4521 EILEEN M. CONNOR (SBN 248856) [email protected] TOBY R. MERRILL (Pro Hac Vice) [email protected] JOSHUA D. ROVENGER (Pro Hac Vice) [email protected] LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL 122 Boylston Street Jamaica Plain, MA 02130 Tel.: (617) 390-3003 Fax: (617) 522-0715 Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MARTIN CALVILLO MANRIQUEZ, JAMAL CORNELIUS, RTHWAN DOBASHI, and JENNIFER CRAIG on behalf of themselves and all others similarly situated, Plaintiffs, v. ELISABETH DEVOS, in her official capacity as Secretary of the United States

) ) ) ) ) ) ) ) ) ) ) ) ) )

Case Number: C 17-cv-07210-SK DECLARATION OF JOSHUA D. ROVENGER IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL MEMORANDUM

Case 3:17-cv-07210-SK Document 65-1 Filed 05/31/18 Page 1 of 3



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Department of Education, And THE UNITED STATES DEPARTMENT OF EDUCATION, Defendants.

) ) ) ) ) ) ) ) )

) )

I, Joshua Rovenger, make this declaration in support of the foregoing Motion for

Preliminary Injunction.

1. I am an attorney at the Legal Services Center of Harvard Law School, where I am an

Attorney in the project on Predatory Student Lending.

2. I submit this affidavit to place before the Court documents in support of Plaintiffs’ Supplemental Memorandum in Response to the Court’s May 25, 2018 Order.

3. Attached as Exhibit 1 is a true and correct redacted copy of a “Claim of Borrower Defense to Repayment of Direct Loans” sent to a borrower defense attestation applicant by Great Lakes loan servicer on May 11, 2016, that was also filed as ECF No. 50-1 in Case No. 16-cv-11949 (D. Mass.).

4. Attached as Exhibit 2 is a true and correct redacted copy of a “Claim of Borrower Defense to Repayment of Direct Loans” sent to a borrower defense attestation applicant by Fedloan Servicing on January 31, 2017.

5. Attached as Exhibit 3 is a true and correct redacted copy of a “Claim of Borrower Defense to Repayment of Direct Loans” sent to a borrower defense attestation applicant by Navient on January 5, 2017.

6. Attached as Exhibit 4 is a true and correct redacted copy of a “Claim of Borrower Defense to Repayment of Your Direct Student Loans” e-mail sent to a borrower defense attestation applicant by FSA Operations on December 11, 2015.




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7. Attached as Exhibit 5 is a true and correct redacted copy of a “Claim of Borrower Defense to Repayment of Your Direct Loans” e-mail sent to a borrower defense attestation applicant by FSA Operations on December 8, 2015.

8. Attached as Exhibit 6 is a true and correct redacted copy of a “Borrower Defense Claim” e-mail sent to a borrower defense attestation applicant by FSA on January 11, 2017.

9. Attached as Exhibit 7 is a true and correct redacted copy of a “Borrower Defense Claim” e-mail sent to a borrower defense attestation applicant by FSA on January 12, 2017.

10. Attached as Exhibit 8 is a is a true and correct redacted copy of a “Borrower Defense claim” e-mail sent to a borrower defense attestation applicant by FSA on January 12, 2017.

Signed under penalties of perjury on March 31, 2018.

/s/ Joshua Rovenger

Joshua D. Rovenger


Case 1:16-cv-11949-LTS Document 50-1 Filed 12/15/17 Page 15 of 16Case 3:17-cv-07210-SK Document 65-2 Filed 05/31/18 Page 1 of 2

Case 1:16-cv-11949-LTS Document 50-1 Filed 12/15/17 Page 16 of 16Case 3:17-cv-07210-SK Document 65-2 Filed 05/31/18 Page 2 of 2

From:To:Subject: Fw: Your Claim of Borrower Defense to Repayment of Your Direct Student LoansDate: Friday, December 11, 2015 Attachments: image001.png

On Tuesday, 8 December 2015, 12:33, FSAOperations <[email protected]> wrote:

December 8, 2015 Dear , We write with regard to your claim for relief based on the borrower defense to repayment rules under 34 C.F.R. §685.206(c). The purpose of this letter is to inform you of student loans that have been determined to be eligible to be discharged. After carefully reviewing your claim, the Department of Education has determined that your claim meets the requirements of a successful borrower defense claim because the acts or omissions of a school you attended would give rise to a cause of action under state law. Accordingly, the federal student Direct Loans you received for the programs of study related to those acts or omissions are eligible for discharge. Those loans are listed in the following table.

Loan Type Loan Award ID* Date of Disbursement Amount Originally Disbursedrect Subsidizedrect Subsidizedrect Subsidizedrect Subsidizedrect Unsubsidizedrect Unsubsidizedrect Unsubsidized

XXXXXXXXXSXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

*The Award ID is a 21 character identifier that uniquely identifies the loan on the NSLDS Loan Detail page. Your servicer may use this or other identifiers for your account.

The loans identified above will be discharged in full. The Department of Education will notify your servicer of the approved discharge within the next 60 days and the discharge should be completed within the next 120 days. Your servicer will send notification of the discharge


once it has been completed. All interest previously accrued on these loans will be removed and any payments made on these loans will be applied to other loans on your account. If your account has no other outstanding balances you will receive a refund for prior payments made. Your loan servicer will notify credit reporting agencies after a discharge has been processed so that your credit history can be updated. This letter only addresses the discharge of the loans indicated above. You must continue to make payments on any loans not listed here unless those loans are in forbearance or deferment. If your claim for borrower defense to repayment relates to other loans not listed here, the eligibility of those loans for discharge is still under consideration. You will be contacted once a decision has been made with respect to any other loans related to your claim. It is important for you to know the potential tax consequences of this loan discharge. The Internal Revenue Service has determined that borrowers will not be required to report income from the discharge of student loans taken out to attend a school owned by Corinthian Colleges, Inc. This means you do not need to take any special steps related to the discharge when filing your federal taxes. You do not need to report that your student loans were discharged or include any additional forms related to the discharge when filing your federal taxes. If you receive a Form 1099-C from your loan servicer, you should keep the form for your records but you do not need to include it when filing your taxes. This discharge may have implications for your state and local taxes, and you may want to consult with your state tax office or a tax professional when filling out state and local tax forms. For additional information about the tax implications of this discharge, visit www.irs.gov. If you have questions about this notice, please contact the Department of Education at [email protected]. Sincerely,U.S. Department of Education


G ail Your Claim of Borrower Defense to Repayment of Your Direct Student Loans 1 message

Tue, Dec 8, 2015

December 8, 2015

Dear

We write with regard to your claim for relief based on the borrower defense to repayment rules under 34 C.F.R. §685.206(c). The purpose of this letter is to inform you of student loans that have been determined to be eligible to be discharged.

After carefully reviewing your claim, the Department of Education has determined that your claim meets the requirements of a successful borrower defense claim because the acts or omissions of a school you attended would give rise to a cause of action under state law. Accordingly. the federal student Direct Loans you received for the programs of study related to those acts or omissions are eligible for discharge. Those loans are listed in the following table.

Loan Type Loan Award ID* Date of Amount Originally Disbursement Disbursed

Direct Subsidized III XII XI-

Direct Subsidized xxxxxxxxxa

Direct Subsidized XXXXXXXXX

Direct Subsidized xxxxxxxxxa

Direct xxxxxxxxx Unsubsidized

XXXXXXXXX


Direct Unsubsidized

Direct Unsubsidized

*The Award ID is a 21 character identifier that uniquely identifies the loan on the NSLDS Loan Detail page. Your seNicer may use this or other identifiers for your account.

The loans identified above will be discharged in full. The Department of Education will notify your servicer of the approved discharge within the next 60 days and the discharge should be completed within the next 120 days. Your servicer will send notification of the discharge once it has been completed. All interest previously accrued on these loans will be removed and any payments made on these loans will be applied to other loans on your account. If your account has no other outstanding balances you will receive a refund for prior payments made. Your loan servicer will notify credit reporting agencies after a discharge has been processed so that your credit history can be updated.

This letter only addresses the discharge of the loans indicated above. You must continue to make payments on any loans not listed here unless those loans are in forbearance or deferment. If your claim for borrower defense to repayment relates to other loans not listed here, the eligibility of those loans for discharge is still under consideration. You will be contacted once a decision has been made with respect to any other loans related to your claim.

It is important for you to know the potential tax consequences of this loan discharge. The Internal Revenue Service has determined that borrowers will not be required to report income from the discharge of student loans taken out to attend a school owned by Corinthian Colleges, Inc. This means you do not need to take any special steps related to the discharge when filing your federal taxes. You do not need to report that your student loans were discharged or include any additional forms related to the discharge when filing your federal taxes. If you receive a Form 1099-C from your loan servicer, you should keep the form for your records but you do not need to include it when filing your taxes. This discharge may have implications for your state and local taxes, and you may want to consult with your state tax office or a tax professional when filling out state and local tax forms.

For additional information about the tax implications of this discharge, visit www.irs.gov.

If you have questions about this notice, please contact the Department of Education at [email protected].

Sincerely,


U.S. Department of Education Case 3:17-cv-07210-SK Document 65-6 Filed 05/31/18 Page 3 of 3

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From:Sent: Wednesday, January 11, 2017 To:Subject: Fwd: Borrower Defense Claim

Sent from my iPhone Begin forwarded message:

From: "U.S. Department of Education" <[email protected]> Date: January 11, 2017 To: Subject: Borrower Defense Claim

January 11, 2017

,

The Department of Education has approved your claim for forgiveness of your federal student loans under the borrower defense to repayment rule, 34 C.F.R. §685.206(c).

If you have Direct Loans related to your approved claim:

The federal student Direct Loans you received for the programs of study related to your approved claim will be discharged (forgiven). The Department will notify your loan servicer of the approved forgiveness, and the forgiveness should be completed within the next 60-120 days. Your servicer will send you more details about the forgiveness, including which loans have been forgiven.

If your account has no other outstanding balances, and your claim is not limited by a statute of limitations, in addition to your loan forgiveness you also may receive a refund for prior payments made on the Direct Loans related to


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