Application — Frank Garrison, et al., Applicants v. Department of Education, et al.
Supreme Court briefNov 1, 2022
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No. 22-_______
IN THE SUPREME COURT OF THE UNITED STATES
FRANK GARRISON, ET AL.,
Applicants
v.
U.S. DEPARTMENT OF EDUCATION, ET AL.,
Respondents
EMERGENCY APPLICATION FOR WRIT OF INJUNCTION PENDING
APPEAL
___________________________________
November 1, 2022
CALEB KRUCKENBERG
Counsel of Record
Pacific Legal Foundation
3100 Clarendon Blvd., Suite 1000
Arlington, VA 22201
CKruckenberg@pacificlegal.org
MICHAEL A. POON
Pacific Legal Foundation
555 Capitol Mall, Ste 1290
Sacramento, CA 95814
MPoon@pacificlegal.org
Counsel for Applicants
STATEMENT PURSUANT TO RULE 29.6
All applicants, and the class they represent, are individuals. Applicants are
represented by Pacific Legal Foundation (PLF), which is a nonprofit, tax-exempt,
California corporation established for the purpose of litigating matters affecting the
public interest. PLF has no parent corporation and no publicly held companies own
more than 10% of PLF’s stock.
i
TABLE OF CONTENTS
STATEMENT PURSUANT TO RULE 29.6 .................................................................. i
TABLE OF CONTENTS ................................................................................................ ii
TABLE OF AUTHORITIES ......................................................................................... iii
INTRODUCTION .......................................................................................................... 1
FACTS AND PROCEDURAL HISTORY...................................................................... 4
A. Federal Student Loans, Repayment, and Forgiveness.................................. 4
B. Imminent and Automatic Loan Cancellation ................................................ 5
C. Harm to the Applicant Class .......................................................................... 9
D. Procedural History ........................................................................................ 10
JURISDICTION........................................................................................................... 11
THIS COURT SHOULD ENJOIN THE POLICY PENDING APPEAL ................... 11
I. APPLICANTS HAVE DEMONSTRATED A STRONG LIKELIHOOF OF
SUCCESS ON THE MERITS ................................................................................ 14
A. Applicants Clearly Have Standing to Challenge a Federal Policy that
Will Necessarily Result in the Imposition of a Tax Liability Under
Existing State Law........................................................................................ 14
B. ED’s Efforts to Moot this Case Must Fail .................................................... 18
1. ED’s Voluntary Exclusion of the Applicants and Creation of the OptOut Mechanism Does Not Moot the Original Claims ............................ 18
2. The Class Will Suffer Imminent, Irreparable Harm, even if the Named
Representatives No Longer Face Loan Cancellation ............................. 22
C. The Underlying Challenge to the Policy Is Likely to Succeed................... 25
1.Respondents’ Debt Cancellation Is Not Supported by Statute ................ 26
a.ED is cancelling debt for statutorily ineligible individuals ................ 27
b.Debt cancellation is not “necessary” .................................................... 29
c. The debt cancellation program presents a major question not
answered by statute............................................................................. 29
d. The statute should be read to avoid constitutional questions ........... 31
2.The Statute Violates the Non-Delegation Doctrine .................................. 32
II. APPLICANTS AND THE CLASS THEY REPRESENT WILL SUFFER
IRREPARABLE HARM ......................................................................................... 34
III. THE INJUNCTION IS EQUITABLE AND IN THE PUBLIC INTEREST ....... 35
ii
CONCLUSION............................................................................................................. 36
iii
TABLE OF AUTHORITIES
Page(s)
Cases
Abbott Lab’ys v. Mead Johnson & Co.,
971 F.2d 6 (7th Cir. 1992) ...................................................................................... 37
AFL-CIO v. Am. Petroleum Inst.,
448 U.S. 607 (1980) ................................................................................................ 32
Ala. Ass’n of Realtors v. HHS,
141 S. Ct. 2485 (2021) ...................................................................................... 30, 36
Bank of Am. Corp. v. City of Miami,
137 S. Ct. 1296 (2017) ............................................................................................ 17
California v. Azar,
911 F.3d 558 (9th Cir. 2018) .................................................................................. 36
California v. Texas,
141 S. Ct. 2104 (2021) ............................................................................................ 15
Cent. Ariz. Water Conservation Dist. v. EPA,
990 F.2d 1531 (9th Cir. 1993) ................................................................................ 17
Chamber of Com. of U.S. v. Edmondson,
594 F.3d 742 (10th Cir. 2010) .......................................................................... 35−36
City of Erie v. Pap’s A.M.,
529 U.S. 277 (2000) ................................................................................................ 21
Clinton v. City of New York,
524 U.S. 417 (1998) .................................................................................... 18, 33−34
Cnty. of Riverside v. McLaughlin,
500 U.S. 44 (1991) ............................................................................................ 23−24
Dep’t of Com. v. New York,
139 S. Ct. 2551 (2019) ................................................................................ 13, 15−16
Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc.,
528 U.S. 167 (2000) .......................................................................................... 19−20
Genesis Healthcare Corp. v. Symczyk,
569 U.S. 66 (2013) ............................................................................................ 13, 23
iv
Gladstone Realtors v. Vill. of Bellwood,
441 U.S. 91 (1979) .................................................................................................. 17
INS v. Chadha,
462 U.S. 919 (1983) ................................................................................................ 32
Japan Whaling Ass’n v. Am. Cetacean Soc.,
478 U.S. 221 (1986) ................................................................................................ 17
La. Pub. Serv. Comm’n v. FCC,
476 U.S. 355 (1986) ................................................................................................ 26
Little Sisters of the Poor Home for the Aged v. Sebelius,
571 U.S. 1171 (2014) ........................................................................................ 12−13
Lucas v. Townsend,
486 U.S. 1301 (1988) .............................................................................................. 12
Marshall Field & Co. v. Clark,
143 U.S. 649 (1892) ................................................................................................ 33
NFIB v. OSHA,
142 S. Ct. 661 (2022) ........................................................................................ 36−37
Nken v. Holder,
556 U.S. 418 (2009) ................................................................................................ 36
Roman Cath. Diocese of Brooklyn v. Cuomo,
141 S. Ct. 63 (2020) ................................................................................................ 12
Russello v. United States,
464 U.S. 16 (1983) .................................................................................................. 30
Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Eng’rs,
531 U.S. 159 (2001) ................................................................................................ 32
Tandon v. Newsom,
141 S. Ct. 1294 (2021) ............................................................................................ 20
Util. Air Regul. Grp. v. EPA,
573 U.S. 302 (2014) ................................................................................................ 30
West Virginia v. EPA,
142 S. Ct. 2587 (2022) .................................................................... 13, 19−22, 29−32
Warth v. Seldin,
422 U.S. 490 (1975) .......................................................................................... 25−26
v
Wheaton Coll. v. Burwell,
134 S. Ct. 2806 (2014) ............................................................................................ 12
Winter v. Nat. Res. Def. Council, Inc.,
555 U.S. 7 (2008) .............................................................................................. 35−36
Statutes
20 U.S.C. § 1077 ............................................................................................................. 4
20 U.S.C. § 1087e(d) ...................................................................................................... 4
20 U.S.C. § 1098bb ....................................................................................... 3, 30, 34−35
28 U.S.C. § 1254 ........................................................................................................... 11
28 U.S.C. § 1651 .......................................................................................................... 11
28 U.S.C. § 2101 ........................................................................................................... 11
Ark. Code § 26-51-404(b)(1) ............................................................................... 5, 16, 35
Ind. Code § 6-3-1-3.5(a)(30) ........................................................................... 5, 9, 15−16
Minn. Stat. § 290.01(19)(f)................................................................................. 6, 16, 35
Miss. Code § 27-7-15(4)(mm) ............................................................................. 6, 16, 35
N.C. Stat. § 105-153.5(c2)(22) ........................................................................... 6, 16, 35
Wis. Stat. § 70.01 ............................................................................................... 6, 16, 35
Regulations
34 C.F.R. § 685.209 ........................................................................................................ 4
87 Fed. Reg. 41,878 .................................................................................................. 5, 28
87 Fed. Reg. 61,512 ................................................................................................ 26, 28
Other Authorities
Chen, Smetters & Paulson, The Biden Student Loan Forgiveness Plan:
Budgetary Costs and Distributional Impact, University of
Pennsylvania, Wharton School (Aug. 26, 2022),
https://budgetmodel.wharton.upenn.edu/issues/2022/8/26/bidenstudent-loan-forgiveness ...................................................................................... 6−7
vi
Congressional Research Service,
LSB10568 Version 3 (Jan. 27, 2021),
https://crsreports.congress.gov/product/pdf/LSB/LSB10568 ................................ 31
Department of Education, Office of the General Counsel, Memorandum
to Betsy DeVos, Secretary of Education (Jan. 12, 2021),
https://static.politico.com/d6/ce/3edf6a3946afa98eb13c210afd7d/ogc
memohealoans.pdf .................................................................................................. 31
FACT SHEET: The Biden-Harris Administration's Plan for Student
Debt Relief, White House (Sept. 20, 2022),
https://www.whitehouse.gov/briefing-room/statementsreleases/2022/09/20/fact-sheet-the-biden-harris-administrationsplan-for-student-debt-relief-could-benefit-tens-of-millions-ofborrowers-in-all-fifty-states/ .................................................................................... 6
FACT SHEET: President Biden Announces Student Loan Relief for
Borrowers Who Need It Most, White House (Aug. 24, 2022),
https://www.whitehouse.gov/briefing-room/statementsreleases/2022/08/24/fact-sheet-president-biden-announces-studentloan-relief-for-borrowers-who-need-it-most/............................................................ 5
Fossum, Sam and Lobosco, Katie, Biden Predicts Student Loan
Borrowers Will Start Receiving Relief Within Weeks, Despite Court
Challenge, CNN (Oct. 27, 2022),
https://www.cnn.com/2022/10/27/politics/biden-student-loanforgiveness/index.html ........................................................................................... 14
Income-Driven Student Loan Forgiveness Act,
H.R. 2034, 117th Cong. (2021) .............................................................................. 31
Lewis, Kevin M. & Liu, Edward C., The Biden Administration Extends
the Pause on Federal Student Loan Payments (Jan. 27, 20221),
https://crsreports.congress.gov/product/pdf/LSB/LSB10568 ................................ 31
One-Time Student Loan Debt Relief, (Oct. 12, 2022),
https://studentaid.gov/debt-relief-announcement/one-timecancellation ............................................................................................................... 8
One-Time Student Loan Debt Relief, (Sept. 27, 2022),
https://studentaid.gov/debt-relief-announcement/one-timecancellation ............................................................................................................... 2
Rogers, Katie, Biden’s Student Debt Plan Touches Off Lawsuits, Scams
and Confusion, NY Times (Sept. 30, 2022),
https://www.nytimes.com/2022/09/30/us/politics/biden-student-loans.html ...................... 23
vii
Shabad, Rachel, Lawsuit seeks to block Biden's student debt forgiveness
program, NBC News, (Sept. 27, 2022)
https://www.nbcnews.com/politics/politics-news/lawsuit-seeks-blockbidens-student-debt-forgiveness-program-rcna49638 ............................................ 7
Student Loan Debt Relief Act of 2019, S. 2235, 116th Cong. (2019) .................. 31, 33
Use of the Heroes Act of 2003 to Cancel the Principal Loan Amounts of
Student Loans,
46 Op. O.L.C. __, 2022 WL 3975075 ........................................................................ 6
viii
TO THE HONORABLE AMY CONEY BARRETT, ASSOCIATE JUSTICE OF
THE SUPREME COURT OF THE UNITED STATES
Applicants Frank Garrison and Noel Johnson are representatives of a class of
borrowers who are set to receive automatic cancellation of a portion of their federal
student loans on or about November 15, 2022. The cancellation will trigger increased
state-tax liability for members of the class, and Applicants therefore respectfully
request that this Court enter an emergency order pursuant to the All Writs Act, 28
U.S.C. § 1651, to prevent this imminent cancellation and resulting tax liability. On
October 21, the U.S. District Court for the Southern District of Indiana dismissed the
case for lack of standing, rejected as moot Applicants’ request for a temporary
restraining order and preliminary injunction, and entered final judgment. Applicants
appealed and moved in the U.S. Court of Appeals for the Seventh Circuit for an
injunction pending appeal. On October 28, the Seventh Circuit denied the motion.
Applicants now seek an injunction from this Court, while the appeal in the Seventh
Circuit proceeds to the merits.
INTRODUCTION
Student debt cancellation is among the most contentious and hotly-debated
proposals in the nation today. And although Congress has erected certain pathways
for loan forgiveness, such as the Public Service Loan Forgiveness (PSLF) program,
some call for the government to cancel loan principals more broadly. Nevertheless,
Congress has declined to do so.
Dissatisfied with Congress’s response, the President announced in August that
Respondents Secretary of Education Miguel Cardona and the Department of
Education (collectively, ED) will unilaterally cancel up to $20,000 in loan principal
for each of 40 million borrowers at a cost of over $500 billion. Of those 40 million
borrowers, 8 million are set to have their debts cancelled automatically.
Despite the staggering scope of this regulatory action, it was taken with
breathtaking informality and opacity. The Department did not undertake the noticeand-comment process required for rulemaking, much less solicit any public input. It
did not even issue a formal order or directive setting out its cancellation program.
Instead, it issued a press release on August 24th along with two legal memoranda
providing its justifications, and, later, a hastily created FAQ section on its website.
Mr. Garrison and Mr. Johnson are the representatives of a class of borrowers
facing automatic debt cancellation who will also face excess tax liability under state
law. When this suit was filed the Department planned to enact “automatic”
cancellation during “early October,” just weeks after first enacting the policy through
a press release. As of September 27, 2022, ED said, “Although most borrowers will
have to apply for debt relief, we have income data on hand for around 8 million
borrowers. These borrowers will get the relief automatically.” One-Time Student Loan
Debt Relief, https://studentaid.gov/debt-relief-announcement/one-time-cancellation
(Sept. 27, 2022) (Sept. 27 FAQs). There was no opt-out process.
In its rush, the administration created new problems for members of the
class—borrowers in at least six states that tax loan cancellation as income and who
are pursuing debt forgiveness under statutory forgiveness programs like PSLF. These
borrowers, including Applicants Garrison and Johnson, will actually be worse off
2
because of the cancellation. Because their debts are expected to be forgiven under a
statutory program anyway, ED’s debt cancellation will not benefit them. Yet, debt
cancelled under ED’s program will trigger state-tax liability, unlike debt cancelled
under the statutory programs. As a result, Mr. Garrison, Mr. Johnson, and
potentially millions of others similarly situated in the six relevant states will receive
no additional benefit from the cancellation—just a one-time additional penalty.
Even after the filing of this suit, the Department’s slapdash policy has changed
from hour to hour and remained utterly elusive. In response to this and other suits,
ED simply updated its website FAQs to try to negate individual claims by creating
an opt-out program whose contours remain informal. Indeed, ED also excluded the
class representatives from the program in a transparent effort to moot their claims.
Meanwhile, however, ED has pressed forward with its stated intent to cancel
hundreds of billions of dollars in student loan debt before any court meaningfully
reviews the action. Up to 8 million borrowers still face “automatic” cancellation as
early as November 15, 2022, many of them in states taxing the cancellation as income.
To prevent this irreparable harm, Applicants respectfully move for an
injunction preventing Respondents from implementing the cancellation. The claimed
basis for the cancellation is the Higher Education Relief Opportunities for Students
(HEROES) Act of 2003, 20 U.S.C. § 1098bb(a)(1), a statute enacted in 2003 during
the Iraq war to provide relief to veterans and their families. But never before has the
Act been used to unilaterally cancel debts en masse, much less at a cost of half a
trillion dollars. And no wonder: ED’s debt cancellation far exceeds the statute’s
3
reasonable constraints. The Act does not authorize debt cancellation; in fact, its terms
clearly forbid ED’s current actions. Further, the use of the Act in this manner inflicts
a grievous wound on our constitutional order.
This is precisely the sort of case for which interim relief was designed. The
Executive Branch’s claimed authority for cancelling half a trillion dollars in student
loans is weak, at best, while allowing the program to move forward will, as a practical
matter, be irreversible once it happens. Further, no borrower will be disadvantaged
by a pause in the program because loan repayments and interest accruals have been
paused since March 2020. Even if the loan cancellation program was lawful, there is
no rush to get it done less than two months after it was announced. This Court must
intervene to ensure appropriate judicial review.
FACTS AND PROCEDURAL HISTORY
A.
Federal Student Loans, Repayment, and Forgiveness
The Higher Education Act allows eligible students at participating schools to
borrow money directly from the Department. 20 U.S.C. §§ 1077, 1091.
Separately, the Act establishes two programs to help borrowers repay their
loans. First, under income-driven repayment (IDR) programs, borrowers contribute a
portion of their income toward their loans. 20 U.S.C. §§ 1087e(d), 1098e. At the end
of a set period, the remaining balance is forgiven. 34 C.F.R. § 685.209. Second, under
the PSLF program, borrowers who make 120 payments while working in qualifying
public-interest positions are eligible to have their balances forgiven. Id. § 1087e(m).
4
Since the beginning of the COVID-19 pandemic, Defendants have suspended
“repayment of and interest accrual on all Federal loans.” 87 Fed. Reg. 41,878, 41,884
(July 13, 2022). As a result, “[n]o one with federally-held loans has had to pay a single
dollar in loan payments,” nor have their balances accumulated interest. FACT
SHEET: President Biden Announces Student Loan Relief for Borrowers Who Need It
Most, White House (Aug. 24, 2022) (FACT SHEET 1). 1 Those participating in PSLF
and IDR are not disadvantaged by this suspension of repayments. Despite making no
payments, each passing month counts toward the payments required for forgiveness.
See id.
B.
Imminent and Automatic Loan Cancellation
On August 24, 2022, Respondents announced a plan to cancel $10,000 of
federal student loan debt for every borrower who, in either 2020 or 2021, earned less
than $125,000 (or $250,000 for those married filing jointly or heads of households).
See Dist. Ct. Dkt. No. 4-4. The amount canceled would increase to $20,000 for eligible
borrowers who had received Pell Grants. Id.
While loan cancellation is not taxed federally as income, at least six states will
tax cancellation as income. See Ark. Code § 26-51-404(b)(1); Ind. Code § 6-3-13.5(a)(30); Minn. Stat. § 290.01(19)(f); Miss. Code § 27-7-15(4)(mm); N.C. Stat. § 105153.5(c2)(22); Wis. Stat. § 70.01.
Originally, the cancellation was to have been implemented in “early October.”
Dist. Ct. Dkt. No. 4-7 at 2. After lawsuits arose, ED delayed the program to October
https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-presidentbiden-announces-student-loan-relief-for-borrowers-who-need-it-most/.
1
5
17, then to October 23. Dist. Ct. Dkt. No. 27. But ED will not undertake notice and
comment or any other ordinary procedure before implementing the program. See Use
of the Heroes Act of 2003 to Cancel the Principal Loan Amounts of Student Loans, 46
Op. O.L.C. __, 2022 WL 3975075, at *3 (Aug. 23, 2022) (OLC Op.).
ED estimates that approximately 40 million borrowers will be eligible for
cancellation. See FACT SHEET: The Biden-Harris Administration’s Plan for Student
Debt Relief, White House (Sept. 20, 2022) (“[A]nalysis from the Department of
Education”) (FACT SHEET 2). 2 An independent study estimated that, altogether,
this one-time cancellation will cost approximately $519 billion. Chen, Smetters &
Paulson, The Biden Student Loan Forgiveness Plan: Budgetary Costs and
Distributional Impact, University of Pennsylvania, Wharton School (Aug. 26, 2022). 3
As originally enacted, 32 million of the 40 million borrowers were required to
apply for the cancellation, but loan cancellation was fully “automatic” for the other 8
million borrowers. As of September 27, 2022, ED emphasized on its website that,
“Although most borrowers will have to apply for debt relief, we have income data on
hand for around 8 million borrowers. These borrowers will get the relief
automatically.” Sept. 27 FAQs. This “automatic[]” cancellation applies to borrowers
who have provided income or other information to ED or their servicer because they
have enrolled in programs like IDR or have certified payments made under PSLF. Id.
According to ED, again as of September 27, 2022, for those receiving automatic
https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/20/fact-sheet-the-bidenharris-administrations-plan-for-student-debt-relief-could-benefit-tens-of-millions-of-borrowers-in-allfifty-states/.
3 https://budgetmodel.wharton.upenn.edu/issues/2022/8/26/biden-student-loan-forgiveness.
2
6
cancellation, “Your loan servicer will notify you when the relief has been applied to
your account, with details on how the relief was applied.” Id.
Many of the borrowers facing automatic cancellation also face potential state
income-tax liabilities, though. ED expects that approximately 856,400 borrowers are
eligible for cancellation in the state of Indiana, which taxes the cancellation as
income. See FACT SHEET 2. Likewise, ED expects more than 3.5 million borrowers
in the other five states that tax cancellation as income will qualify. See id. Potentially
massive numbers of those borrowers will receive cancellation automatically.
In response to this suit, ED hastily created a mechanism for borrowers to opt
out from the automatic cancellation. Just hours after this suit was filed, White House
press secretary Karine Jean-Pierre commented on it at a daily briefing, saying,
“Opponents of the Biden-Harris administration’s student loan plans are trying to
stop it because it will provide much needed relief for working families. Anyone who
doesn’t want to get that debt relief can opt out.” Shabad, Rachel, Lawsuit seeks to
block Biden's student debt forgiveness program, NBC News, (Sept. 27, 2022)
https://www.nbcnews.com/politics/politics-news/lawsuit-seeks-block-bidens-studentdebt-forgiveness-program-rcna49638 At the time, however, ED’s own website said
nothing about opting out, and still proudly proclaimed that “around 8 million
borrowers” “will get the relief automatically.” Sept. 27 FAQs.
The next day, ED quietly amended its website to conform its policy to the Press
Secretary’s. As ED said in a notice to the district court, it had amended its website,
which apparently contains the full and final regulatory action concerning
7
cancellation, to now include the language, “If you would like to opt out of debt relief
for any reason, including because you are concerned about a state tax liability, you
will be given an opportunity to opt out.” See Dist. Ct. Dkt. No. 13.
Applicants filed their Amended Complaint, motions for temporary injunctive
relief, and motion for class certification on October 10, 2022, and, at the time, the
opt-out mechanism remained completely unspecified. See Dist. Ct. Dkt. Nos. 23–26.
Applicants’ filings pointed out there was no actual mechanism to opt out and no
notice was planned to inform borrowers of the ability to optout. In response, ED yet
again changed its website to avoid review. In its briefing in the district court, ED
revealed that “since October 12, it has provided instructions a borrower can use to
contact her loan servicer to opt out of such relief.” Dist. Ct. Dkt. No. 31 at 6. ED’s
FAQs put the onus entirely on the borrower; “If you would like to opt out of debt
relief for any reason—including because you are concerned about a potential state
tax liability—contact your loan servicer by phone or email and tell them that you
don’t want to receive one-time student loan debt relief.” One-Time Student Loan Debt
Relief, https://studentaid.gov/debt-relief-announcement/one-time-cancellation (Oct.
12, 2022) (Oct. 12 FAQs).
On October 18, 2022, ED also represented that, in response to this litigation,
“Starting today, the Department also began sending borrowers who it has
determined are eligible for debt relief without applying an email notifying them of
their eligibility and the option to opt out.” Dist. Ct. Dkt. No. 31 at 6. Details of who
will receive that email, where the list of email addresses comes from (and whether
8
they can be relied upon to be up-to-date), or if the Department will take any other
measures to notify the class, remain elusive. See id. ED also represented that
borrowers in the automatic cancellation class only have “until November 14 to opt
out.” Id. After that date, ED still intends to automatically cancel a portion of their
debts. Id.
C.
Harm to the Applicant Class
It is undisputed that Applicant Garrison faced automatic and mandatory loan
cancellation of $20,000 of his debt at the time this suit was initially filed. See Dist.
Ct. Dkt. No. 4, at 6–8. Likewise, Applicant Johnson faced automatic cancellation of
$10,000 of his debt when he joined the suit at the time the Amended Complaint was
filed. See Dist. Ct. Dkt. No. 25-8 (Johnson Decl. ¶¶ 2–8).
Both class representatives are pursuing PSLF and reside in Indiana, so that
ED’s cancellation (but not PSLF) will increase their state-tax liability, by more than
$1,000 or $500 respectively. See Ind. Code § 6-3-1-3.5(a)(30).
As part of its efforts to avoid judicial review, ED removed Mr. Garrison from
automatic cancellation after he filed suit. Dist. Ct. Dkt. No. 13. Likewise, ED
exempted Mr. Johnson from cancellation after he joined the suit. See Dist. Ct. Dkt.
No. 31. However, it did so after Mr. Johnson sought to act as the representative of a
putative class that still faces automatic cancellation, will incur state tax liability, and
has had inadequate notice of any opt-out provision. See Dist. Ct. Dkt. No. 24.
Even after ED changed its policy in response to this litigation, opting out
requires affected borrowers to recognize that they face state tax liability for
9
cancellation and then contacting their servicers, and not ED, to request relief from
ED’s policy. Oct. 12 FAQs. Automatic cancellation for those who do not opt out will
likely occur immediately following November 14, 2022. See Dist. Ct. Dkt. No. 31 at 6.
D.
Procedural History
Applicant Garrison filed a Complaint on September 27, 2022, on his own
behalf. Dist. Ct. Dkt. No. 1 (Attachment A). Mr. Garrison also filed for a temporary
restraining order to stop Respondents from implementing “automatic” cancellation.
Dist. Ct. Dkt. No. 4. The next day, ED attempted to moot the case by exempting Mr.
Garrison from the program. Dist. Ct. Dkt. No. 13. In response the district court denied
preliminary relief and granted Mr. Garrison leave to amend his complaint. Dist. Ct.
Dkt. No. 16.
Mr. Garrison, joined by Mr. Johnson, filed an Amended Complaint on behalf of
a class of similarly-situated borrowers on October 10, 2022. Dist. Ct. Dkt. No. 23
(Attachment B). The same day, they moved for preliminary relief and class
certification. See Dist. Ct. Dkt. Nos. 24, 25, 26. ED responded by agreeing that “the
Department will not discharge any student loan debt pursuant to the policy
challenged in this case prior to October 23, 2022,” and briefing its response in
opposition to preliminary relief. See Dist. Ct. Dkt. Nos. 27, 31.
On October 21, 2022, the district court dismissed Applicants’ Amended
Complaint, after it concluded that the class lacked standing because the tax
consequences of cancellation were not “traceable” to the federal program. Dist. Ct.
Dkt. No. 36 at 6 (Attachment C). The district court also entered final judgment
10
against Applicants. Dist. Ct. Dkt. No. 37. Applicants filed a notice of appeal that same
day. Dist. Ct. Dkt. No. 38 (Attachment D).
Applicants moved for an injunction pending appeal with the Seventh Circuit
on October 24, 2022. On October 28, 2022, a panel of that court denied the motion in
an order, once again finding a lack of standing, but this time because ED had
successfully excluded the class representatives after they filed suit. Garrison, et al.,
v. Dept. of Education, et al., No. 22-2886, Dkt. No. 9 (Oct. 28, 2022) (Attachment E).
JURISDICTION
The district court dismissed Applicant’s Amended Complaint on October 21,
2022. Attachment C. Applicants filed a notice of appeal the same day. Attachment D.
Applicants’ merits appeal is pending in the Seventh Circuit Court of Appeals.
Applicants moved for an injunction pending appeal pursuant to Rule 8 of the Federal
Rules of Appellate Procedure, which the Seventh Circuit denied in an order on
October 28, 2022. Attachment E. This Court’s jurisdiction is invoked under 28 U.S.C.
§§ 1254, 1651, 2101.
THIS COURT SHOULD ENJOIN THE POLICY PENDING APPEAL
The Circuit Justices of this Court have authority to issue injunctions under the
All Writs Act, 28 U.S.C. § 1651(a), when applicants’ claims “are likely to prevail,” the
denial of injunctive relief “would lead to irreparable injury,” and “granting relief
would not harm the public interest.” Roman Cath. Diocese of Brooklyn v. Cuomo, 141
S. Ct. 63, 65–66 (2020). These are the same well-known factors used for preliminary
injunctions. See id. (citing Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008)).
11
Under this standard, the first prong does not require ultimate success on the
merits. An application for an injunction may be granted without serving “as an
expression of the Court’s views on the merits,” to prevent enforcement of a potentially
unconstitutional statute. See Little Sisters of the Poor Home for the Aged v. Sebelius,
571 U.S. 1171 (2014) (mem.). The Court has thus granted emergency injunctions
pending appeal when there is a “fair prospect” of reversal and a likelihood of
“irreparable harm . . . from the denial of equitable relief.” Lucas v. Townsend, 486
U.S. 1301, 1304 (1988) (Kennedy, J., in chambers); see also, e.g., Wheaton Coll. v.
Burwell, 134 S. Ct. 2806, 2807 (2014) (granting injunction enjoining enforcement of
challenged provisions of the Affordable Care Act “pending final disposition of
appellate review”); Roman Catholic Diocese, 141 S. Ct. at 66 (granting injunction
enjoining enforcement of executive order limiting attendance at religious services).
Applicants satisfy the standard for an emergency injunction. First, this appeal
presents a clear case for relief. Respondents are poised to enact a transformational
policy with profound political and economic reach on the flimsiest of statutory
pretexts. The HEROES Act simply cannot bear the weight of the looming cancellation
policy. The Executive has thus improperly seized from Congress the prerogative to
“make major policy decisions.” West Virginia v. EPA, 142 S. Ct. 2587, 2609 (2022).
And as in Little Sisters, 571 U.S. at 1171, the relevant statutory provision is likely
unconstitutional.
Rather than addressing the legality of the policy itself, the lower courts simply
rewarded ED’s cynical attempts to evade review. The district court incorrectly
12
concluded that the class of affected borrowers lacked standing because their concrete
injuries were caused by third parties. Attachment C. This Court has held to the
contrary. See Dep’t of Com. v. New York, 139 S. Ct. 2551, 2566 (2019) (standing based
injury caused by the independent decision of a third party because it was “likely” that
a third party would “react in predictable ways to” the challenged action). Rather than
defending that notion, the Seventh Circuit found no present harms, Attachment E,
but confused standing with mootness and ignored the remaining members of the
plaintiff class entirely. See Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 76
(2013) (the cessation of a named plaintiff’s injury does not bar class-wide injunctive
relief). While the appeal continues on the merits in the Seventh Circuit, it cannot now
be decided before ED’s policy comes to fruition. This Court’s intervention is needed to
protect the lower court’s ability to meaningfully decide the merits question that ED
so desperately wishes to avoid.
Second, Applicants’ request is both extraordinarily time-sensitive and solely
within this Court’s power to redress. ED’s policy was set to be enacted already, and
the plaintiff class had faced unwanted “automatic” loan cancellation during “early
October.” Sept. 27 FAQs. This and other litigation slowed the policy only slightly, but
ED has represented that it will continue with its automatic cancellation policy no
later than November 15, 2022. Dist. Ct. Dkt. No. 31 at 6. And on October 27, 2022,
President Biden declared, “I think in the next two weeks you’re going to see those
13
checks going out.” 4 Once ED acts, the program cannot be unwound. As a one-time
action that causes irreparable harm to potentially millions of class members, the only
way to stop it pending a final merits review is this Court’s intervention.
Third, the balance of equities weighs heavily in favor of maintaining the status
quo. There is simply no legitimate reason for ED to rush through its obviously
unlawful policy without so much as a formal order setting it out. After all, ED has
already paused all repayment and interest on federal student debts. The risks of
allowing cancellation are profound, both to the plaintiff class and our constitutional
order.
I.
APPLICANTS HAVE DEMONSTRATED A STRONG LIKELIHOOD OF
SUCCESS ON THE MERITS
Applicants have an unusually strong likelihood of prevailing on the merits. The
lower courts’ decisions on standing were undoubtedly wrong. Furthermore, not only
does this Court presume the merits of Applicants’ underlying challenge to ED’s policy,
but that underlying challenge also has a strong likelihood of success.
A.
Applicants Clearly Have Standing to Challenge a Federal
Policy that Will Necessarily Result in the Imposition of a Tax
Liability Under Existing State Law
“A plaintiff has standing only if he can allege personal injury fairly traceable
to the defendant’s allegedly unlawful conduct and likely to be redressed by the
requested relief.” California v. Texas, 141 S. Ct. 2104, 2113 (2021) (cleaned up).
4 Sam Fossum and Katie Lobosco, Biden Predicts Student Loan Borrowers Will Start Receiving Relief
Within
Weeks,
Despite
Court
Challenge,
CNN
https://www.cnn.com/2022/10/27/politics/biden-student-loan-forgiveness/index.html.
14
(Oct.
27,
2022)
When “a causal relation between injury and challenged action depends upon
the decision of an independent third party,” a plaintiff “must show at the least that
third parties will likely react in predictable ways.” Id. at 2117 (cleaned up).
Predictability is not a huge hurdle. This Court found standing, for instance, when it
was “likely” that a third party would “react in predictable ways to [a] citizenship
question [on the census], even if they do so unlawfully[.]” Commerce, 139 S. Ct. at
2566.
The injury to members of the class is more than predictable; it is certain.
Though ED has excluded Mr. Garrison and Mr. Johnson from automatic cancellation,
their circumstances are exemplary of class members’. Any loan forgiveness that Mr.
Garrison or Mr. Johnson receive pursuant to the pre-existing PSLF program, as it
was enacted prior to January 1, 2020, will not be taxed in Indiana as income. See Ind.
Code § 6-3-1-3.5(a)(30). But if Mr. Garrison received $20,000 in automatic
cancellation under the challenged loan forgiveness program, he would face a state
income tax liability (including county income tax) of more than $1,000 for 2022. See
id. Mr. Johnson would face more than $500 in tax liability for his $10,000
cancellation. See id. That is hardly conjecture. Indeed, it is far more than
“predictable” that Indiana will apply its laws as written. See Commerce, 139 S. Ct. at
2566. And the remaining states that will tax cancellation as income will likewise
apply their own laws as written. See e.g., Ark. Code § 26-51-404(b)(1); Minn. Stat. §
290.01(19)(f); Miss. Code § 27-7-15(4)(mm); N.C. Stat. § 105-153.5(c2)(22); Wis. Stat.
§ 70.01. An injunction, however, would redress that injury, by stopping the automatic
15
cancellation and avoiding these harms. Applicants and the class members therefore
have standing to sue to stop ED’s policy. See Commerce, 139 S. Ct. at 2566.
Despite this straightforward analysis, the district court dismissed this case
after it erroneously concluded that the tax consequences of cancellation were not
“traceable” to the federal program. Attachment C at 6. In the district court’s view, the
tax liability that will arise the moment ED’s policy is enacted is simply a matter for
state courts to resolve. Id.
The district court was wrong in its assertion that “[a]n injury is not traceable
to the decision of a defendant where the injury flows from a different, independent
decision made by a third party.” Id. at 6. On the contrary, “Article III requires no
more than de facto causality.” Commerce, 139 S. Ct. at 2566. Cases therefore abound
where parties had standing to challenge agency action that resulted in an indirect
harm, even when it came from an independent third party. See id. For instance, this
Court has long held that a party has standing to challenge agency action when it will
simply allow conduct that results in an injury. See, e.g., Japan Whaling Ass’n v. Am.
Cetacean Soc., 478 U.S. 221, 230 (1986) (whale watchers suffered injury-in-fact from
agency’s refusal to punish unlawful Japanese whaling activities).
This Court has likewise found standing where a defendant’s actions were
reasonably likely to result in a third party injuring the plaintiff, even where the
defendant does not coerce or even encourage that injury. In Gladstone Realtors v. Vill.
of Bellwood, 441 U.S. 91 (1979), the Court held that realtors’ racial steering practices
injured the village through third parties. A higher minority population could
16
“precipitate an exodus of white residents,” injuring the municipality’s “racial balance
and stability,” even though the white residents had no interactions with the realtors
themselves. Id. at 110–11; see also Bank of Am. Corp. v. City of Miami, 137 S. Ct.
1296, 1304–05 (2017) (discriminatory loans injured city, because, inter alia, the
expected foreclosures can result in individuals committing more crimes in the area,
thus requiring more police services). Nor does it matter that the state statutes preexist ED’s program, because the program increases the cost of complying with the
statutes. Cf. Cent. Ariz. Water Conservation Dist. v. EPA, 990 F.2d 1531, 1537–38
(9th Cir. 1993) (traceability satisfied where EPA rule “increased financial burden” of
complying with pre-existing agreement.). These cases reinforce the conclusion in
Commerce that the relevant inquiry is de facto causation, not whether the defendant
determined, coerced, or cajoled a third party into injuring the plaintiff.
A person thus has standing to challenge a government action resulting in tax
liability. Consider Clinton v. City of New York, 524 U.S. 417 (1998). There both the
city and individual hospitals challenged the President’s reinstatement of a decision
by Health and Human Services that resulted in tax liability. Id. at 421, 431. This
Court found standing to challenge the President’s actions because the city and
hospitals had a “multibillion dollar contingent liability that had been eliminated”
without the President’s action. Id. at 430. Even to the extent that the contingent
liability may or may not ever need to be paid by the challengers, they suffered an
“immediate injury” merely by the effect of the “contingent liability.” Id. at 431.
17
Applicants suffer the same type of contingent tax liability, which will only arise
once cancellation occurs. Thus, Applicants have standing to challenge the
cancellation policy that gives rise to that liability. See Clinton, 524 U.S. at 430−31.
The district court’s decision on standing was wholly inconsistent with controlling
precedent.
B.
ED’s Efforts to Moot this Case Must Fail
Without even requesting input from ED, a panel of the Seventh Circuit denied
relief by erroneously confusing standing with mootness and then getting the
mootness question wrong. According to the panel, “The federal program is not
compulsory. Debtors who do not want their loans reduced or cancelled are free to opt
out. The Department of Education has treated both plaintiffs as exercising this
option. None of their debt will be cancelled, and they will not be subject to a tax on a
reduction of indebtedness. It follows that the program does not injure them and that
they lack standing to sue.” Attachment E. But that decision again ignores controlling
law that shows Applicants’ individual claims should be reviewed under a mootness
exception and the class allegations remain live even though ED removed the class
representatives from cancellation in response to the suit.
1.
ED’s Voluntary Exclusion of the Applicants and Creation
of the Opt-Out Mechanism Does Not Moot the Original
Claims
First, under the voluntary cessation doctrine, this Court may review this case
notwithstanding any of ED’s changes since Applicant Garrison first filed. In essence,
18
this Court should return to the circumstances first presented and ignore ED’s shifting
efforts to alter the program to evade review.
Standing is measured at the time a complaint is filed, but mootness is often
described as “the doctrine of standing set in a time frame”; that is, “[t]he requisite
personal interest that must exist at the commencement of the litigation (standing)
must continue throughout its existence (mootness).” Friends of the Earth, Inc. v.
Laidlaw Env’t Servs. (TOC), Inc., 528 U.S. 167, 189, (2000). This is not a
“comprehensive” explanation, though, and well-known exceptions allow review even
when the challenged conduct ends. Id. at 190−91. And it is sometimes easy to
“confuse[] mootness with standing.” See id. at 189. “The distinction matters because
the Government, not petitioners, bears the burden to establish that a once-live case
has become moot.” West Virginia, 142 S. Ct. at 2607.
When this case was filed, Applicant Garrison faced an imminent injury from
the loan cancellation policy proposed by ED. There was no opt-out at all. The Seventh
Circuit’s observation that “[d]ebtors who do not want their loans reduced or cancelled
are free to opt out,” Attachment E, focused only on ED’s response to the litigation.
And when the Amended Complaint was filed, Applicant Johnson likewise faced
automatic cancellation, as did the class he immediately moved to certify. See Dist. Ct.
Dkt. Nos. 23, 24. It was therefore also false that, at the time of the filing, “ED has
treated both plaintiffs as exercising this option” to opt-out. See Attachment E. Thus,
“the Court of Appeals confused mootness with standing.” Friends of the Earth, 528
U.S. at 189.
19
When the question of mootness arises because of a defendant’s voluntary
action, the defendant “bears the formidable burden of showing that it is absolutely
clear the allegedly wrongful behavior could not reasonably be expected to recur.”
Friends of the Earth, 528 U.S. at 190. If the Government invokes mootness based on
its voluntary conduct, a court “do[es] not dismiss a case as moot” if “the Government
nowhere suggests that if this litigation is resolved in its favor it will not reimpose”
the challenged policy, but instead “vigorously defends the legality of such an
approach.” West Virginia, 142 S. Ct. at 2607. (cleaned up); see also Tandon v. Newsom,
141 S. Ct. 1294, 1297 (2021) (emphasizing that “even if the government withdraws or
modifies a [policy] in the course of litigation, that does not necessarily moot the case”).
Voluntary cessation looks closely at the realities of a defendant’s conduct—
where the circumstances surrounding the cessation suggest that the defendant is
“attempting to manipulate the [c]ourt’s jurisdiction to insulate a favorable decision
from review,” a case is not moot. City of Erie v. Pap’s A.M., 529 U.S. 277, 288 (2000).
Further, this Court recently rejected any special solicitude to the Government,
applying the normal heavy presumption of impropriety against the Government’s
attempt to moot a case through voluntary cessation. See West Virginia, 142 S. Ct. at
2607.
From the start, ED has done everything in its power to change the program
just enough to avoid review. When Mr. Garrison filed his original complaint on
September 27, 2022, ED still advertised “automatic” cancellation for up to 8 million
borrowers, including him. At the time, there was no way to opt out. But just hours
20
after this suit was filed, the White House announced an opt-out policy that did not
yet exist. See Shabad, NBC News, supra. The next day, ED amended its website to
say, “If you would like to opt out of debt relief for any reason, including because you
are concerned about a state tax liability, you will be given an opportunity to opt out.”
See Dist. Ct. Dkt. No. 13. How a recipient of loan cancellation would capitalize on that
“opportunity” would remain unclear for weeks, until ED yet again amended its
website in response to this litigation to inform the public that they must contact their
loan servicers instead of ED to request a chance to opt-out. See Oct. 12, FAQs.
Meanwhile, ED addressed Mr. Garrison’s claims directly. ED filed a notice alerting
the district court that it had tried to moot Mr. Garrison’s claim by considering the
suit his effort “to opt out of the program.” Dist. Ct. Dkt. No. 13. Thus, in direct
response to the suit, ED created the opt-out mechanism and simultaneously excluded
Mr. Garrison from the automatic cancellation policy.
ED’s manipulations continued when Mr. Johnson joined the suit on behalf of
the class. The Department yet again treated his lawsuit as his decision to opt-out. See
Dist. Ct. Dkt. No. 31. But ED ignored the class as a whole and has insisted that it
will still go forward with automatic cancellation. See id. ED clearly removed the
representatives’ harms simply to avoid review of the class claims.
ED’s manipulation should prompt careful review. ED has not disavowed its
policy, or the legality of it, for the 8 million borrowers it still insists will get
“automatic” cancellation any day. And while the voluntary cessation doctrine allows
review even if no class member still faces any harm, the opt-out policy—which places
21
the onus entirely on members of the class to know they face adverse tax consequences
and then to opt out of loan cancellation—is hardly sufficient to alleviate their
potential harms. Indeed, just the fact that some automatic cancellation still exists
proves it is not “absolutely clear” that the policy “could not reasonably be expected to
recur.” See West Virginia, 142 S. Ct. at 2607. ED’s voluntary change in conduct toward
Applicants does not prevent review.
ED’s actions in other cases confirm its motives. The day after ED tried to moot
this suit, it tried the same tactic against a suit filed by six states. Within hours of
that suit’s filing, ED yet again changed the program. Even the New York Times
noticed what ED was doing—since the “automatic cancellation” at issue in this case
“would leave the plan open to legal challenges,” and the challenged aspect of
forgiveness in the States’ lawsuit raised profound legal question, “[t]he effort [from
ED] was no coincidence — eliminating eligibility for those students could make it
harder for a Republican attorney general to successfully attack the entire program in
court.” Katie Rogers, Biden’s Student Debt Plan Touches Off Lawsuits, Scams and
Confusion, NY Times (Sept. 30, 2022). 5 ED should not be allowed to succeed in its
clear effort to avoid judicial review.
2.
The Class Will Suffer Imminent, Irreparable Harm, even
if the Named Representatives No Longer Face Loan
Cancellation
“[I]nherently transitory” claims for class-wide injunctive relief will not become
moot once the named plaintiff no longer suffers the challenged harms. See Genesis
5 https://www.nytimes.com/2022/09/30/us/politics/biden-student-loans.html
22
Healthcare, 569 U.S. at 76. As this Court said, under the “relation-back doctrine,” the
cessation of the named plaintiff’s injury does not bar class-wide injunctive relief
“where it is certain that other persons similarly situated will continue to be subject
to the challenged conduct and the claims raised are so inherently transitory that the
trial court will not have even enough time to rule on a motion for class certification
before the proposed representative’s individual interest expires.” Id. (cleaned up).
Thus, “in cases where the transitory nature of the conduct giving rise to the suit
would effectively insulate defendants’ conduct from review, certification could
potentially ‘relate back’ to the filing of the complaint.” Id.
Indeed, this Court has long recognized the need to review class actions of this
type particularly where the defendant tries to remedy only the class representatives’
harms. See, e.g., Cnty. of Riverside v. McLaughlin, 500 U.S. 44, 51–52 (1991)
(challenge to lack of probable cause hearing for the class was not moot even when
class representatives were given hearings). As this Court said, “[T]he termination of
a class representative’s claim does not moot the claims of the unnamed members of
the class.” Id. (citations omitted). Moreover, “[t]hat the class was not certified until
after the named plaintiffs’ claims had become moot does not deprive us of
jurisdiction.” Id.
ED’s attempt to moot the class-wide injury suffered by borrowers in the
relevant states by suddenly stopping the harm to the class representatives fails under
this exception. Instead, the analysis should focus on the state of affairs when the
plaintiffs sought class certification and challenged the adequacy of the hastily created
23
opt-out mechanism. Even though ED has since excluded the class representatives,
they can still challenge the policy on behalf of the class.
The loan cancellation program remains imminent for anyone in the class of
automatic cancellation, and once it occurs, it is irreversible. As discussed, ED reacted
to Mr. Garrison’s suit by agreeing not to automatically cancel only his loans, and
simply promising to build in a mechanism that allows others to opt-out. But others
in Mr. Garrison’s situation will only exercise that option if they both know that they
face the same tax liability and that an opt-out exists. Mr. Johnson filed on behalf of
a class to challenge the adequacy of that “option,” but rather than address his
challenge, ED simply tried to pick him off as a class representative by excluding him
from cancellation as well. Because ED did not extend that remedy to the class—even
though Applicants had moved to certify the class immediately—ED’s action does not
moot the claims on behalf of the class. See Cnty. of Riverside, 500 U.S. at 51–52.
The class, meanwhile, continues to face a wholly inadequate opt-out
mechanism that will not prevent the harms it faces, because ED is not acting toward
the class as it has acted toward the class representatives. 6 Whereas ED exempted the
class representatives from the program, it has merely created an opt-out for the class
that they have to choose to activate themselves. These are not equivalent options.
The only way to make them equivalent would be to allow class members to opt in to
6 It is also important to distinguish the harms from the inadequate opt-out mechanism for purposes of
standing from the harms as they relate to the need for an injunction. Because the class might suffer
any harm, it has standing to challenge the automatic cancellation policy. Of course, as discussed below,
because the opt-out mechanism is inadequate to prevent widespread harm to the class, an injunction
is necessary.
24
loan cancellation. Otherwise, the only option for class members that would allow
them to be treated the same as ED has treated the class representatives would be for
each member of the class to sue individually, so ED could then exempt them from the
program. This, of course, would defeat the whole point of a class action and of the
voluntary cessation exception to mootness. ED should not be permitted to evade
review by changing course mid-litigation, as it so obviously is attempting to do.
Review is therefore proper notwithstanding ED’s attempted manipulation of this
Court’s Article III jurisdiction.
C.
The Underlying Challenge to the Policy Is Likely to Succeed
“[S]tanding in no way depends on the merits of the plaintiff’s contention that
particular conduct is illegal[.]” Warth v. Seldin, 422 U.S. 490, 500 (1975). When
reviewing a decision on standing, this Court assumes that the challenged conduct is
unlawful. Id. at 502. Thus, an injunction is appropriate regardless of whether
Applicants’ underlying challenge to the cancellation policy will succeed.
But if the Court were to look further, the cancellation policy is clearly unlawful.
“[A]n agency literally has no power to act . . . unless and until Congress confers power
upon it.” La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374 (1986). Particularly when
the Executive claims “sweeping and consequential authority,” a “colorable textual
basis” in statute is insufficient; rather, the Executive must point to “clear
congressional authorization.” West Virginia, 142 S. Ct. at 2608−09. The HEROES Act
not only lacks such clear authorization, but its terms clearly do not support ED’s
broad actions. Moreover, the HEROES Act’s waiver provision empowers the
25
Executive to modify law and therefore violates the non-delegation doctrine. It thus
cannot support ED’s cancellation program.
1.
Respondents’ Debt Cancellation Is Not Supported by
Statute
ED is purportedly implementing the cancellation program pursuant to the
HEROES Act’s waiver provision. See Federal Student Aid Programs, 87 Fed. Reg.
61,512 (Oct. 12, 2022). But the program cannot be supported by the statute’s text.
Under the HEROES Act, “[t]he Secretary of Education . . . may waive or modify
any statutory or regulatory provision applicable to . . . student financial assistance
programs . . . as the Secretary deems necessary in connection with a war or other
military operation or national emergency to provide . . . waivers or modifications.” 20
U.S.C. § 1098bb(a)(1)−(2)(A). The waivers or modifications must “be necessary to
ensure that . . . recipients of student financial assistance . . . who are affected
individuals are not placed in a worse place financially in relation to that financial
assistance because of their status as affected individuals[.]” Id. And an “affected
individual” includes “an individual who . . . resides or is employed in an area that is
declared a disaster area by any Federal, State, or local official in connection with a
national emergency” and an individual who “suffered direct economic hardship as a
direct result of a war or other military operation or national emergency, as
determined by the Secretary.” Id. § 1098ee(2).
ED’s blanket cancellation policy does not follow this text, however, as it applies
broadly to individuals who are not “affected” by the declared emergency, and is not
“necessary” to alleviate direct harms from the declared emergency. Indeed, the
26
cancellation policy is a massively overbroad measure devoid of any respect for the
statutory limits.
a.
ED is cancelling debt for statutorily ineligible
individuals
Under the relevant provisions, the Secretary may provide waivers only to
individuals who would otherwise be (1) “in a worse position financially” (2) “in
relation to their financial assistance” (3) “because of their status as affected
individuals.” Id. § 1098bb(a)(2)(A). ED’s debt cancellation far exceeds these limits.
First, cancellation will be available to those who are in a better financial
position, such as those whose wealth or income have increased since 2020 when the
COVID-19 pandemic started. Because the cancellation program’s sole substantive
criterion is an income of less than $125,000 in either 2020 or 2021 (or $250,000 for
households), those whose income has increased from 2019 to 2020 to 2021 will be
eligible for cancellation. This flies in the face of the statutory requirement that the
waiver be only for “affected individuals” who are “in a worse position financially”
because of the pandemic. See id.
Second, no borrower will be worse off “in relation to their financial assistance.”
See id. That’s because repayments and interest accrual have been paused “since
March 2020.” 87 Fed. Reg. 41,878, 41,884 (July 13, 2022). Additionally, participants
in PSLF and IDR continue to earn credit toward the payments necessary to obtain
forgiveness under those programs, despite making no payments. See Dist. Ct. Dkt.
No. 4, Ex. 2, at 1–2, Ex. 3, at 1. Once again, the policy broadly acts as though the
opposite were true.
27
Third, even assuming there are those who would be worse off with respect to
their federal student loans in the absence of debt cancelation, no part of ED’s plan
limits cancelation to those who would be worse off “because of their status as affected
individuals.” 20 U.S.C. § 1098bb(a)(2)(A). The entire nation may have been declared
to be a disaster area, 87 Fed. Reg. at 61,513, but no one suggests any borrower is
worse off because he lives or works in the United States (all of which has been
declared a disaster area). Cf. id. § 1098ee(2)(C). And the cancelation program’s
eligibility criteria far exceed those who have “suffered direct economic hardship as a
direct result of” the COVID-19 pandemic. Id. § 1098ee(2)(D). To the extent individuals
have been “determined by the Secretary,” id., to be suffering from such hardship
despite not actually so suffering, they cannot be worse off “because of” that
designation, id. § 1098bb(a)(2)(A).
To be sure, “[t]he Secretary is not required to exercise the waiver or
modification authority . . . on a case-by-case basis.” Id. § 1098bb(b)(3). And that allows
him to grant relief to categories of individuals all of whom are eligible for relief, such
as the residents of a city destroyed by a war. But the Secretary’s power to exercise
waiver authority on a categorical basis does not give the Secretary the power to
enormously expand who may receive a waiver under § 1098bb(a)(2)(A). See West
Virginia, 142 S. Ct. at 2609 (Congress does not “use oblique or elliptical language to
empower an agency to make a radical or fundamental change to a statutory scheme.”
(simplified)); infra Part I.B.1.c (discussing the major questions doctrine). Even when
making categorical choices, the Secretary still must respect the statutory criteria.
28
b.
Debt cancellation is not “necessary”
Under § 1098bb(a)(2)(A), waivers are permitted only if “necessary” to ensure
affected individuals are not placed in a worse position with respect to their federal
loans because of their status as affected individuals. As discussed, by suspending
repayment and interest accrual, ED has placed borrowers in the same position now
as before the pandemic with respect to their federal loans. Debt cancellation is clearly
unnecessary to achieve the statutory goal under § 1098bb(a)(2)(A). This “necessary”
requirement is meant to place real limits on the Secretary’s discretion, as
demonstrated by contrast with the broader “as the Secretary deems necessary”
language just one paragrapher earlier, see id. § 1098bb(a)(1) (emphasis added). See
Russello v. United States, 464 U.S. 16, 23 (1983) (“[I]t is generally presumed that
Congress acts intentionally and purposely in the disparate inclusion or exclusion” of
statutory language).
ED’s disregard for necessity is most obvious in their plan to refund loan
payments to borrowers who have finished paying off their loans and reimpose debt in
the refunded amount—just so they can cancel that debt and give those onceborrowers a windfall. See Dist. Ct. Dkt. No. 35 at 4. Nothing could suggest this is
necessary to protect these individuals from being worse off with respect to their
student loans. They do not even currently have such loans.
c.
The debt cancellation program presents a major
question not answered by statute
The Court does not assume that Congress has assigned to the Executive
Branch questions of “vast economic and political significance” without a “clear
29
statement” to that effect. West Virginia, 142 S. Ct. at 2605. This is particularly so
“[w]hen an agency claims to discover in a long-extant statute an unheralded power to
regulate a significant portion of the American economy.” Util. Air Regul. Grp. v. EPA,
573 U.S. 302, 324 (2014). In such circumstances, a court should adopt a narrow
reading of a statute. See Ala. Ass’n of Realtors v. HHS, 141 S. Ct. 2485, 2489 (2021).
Outright debt cancellation—on a categorical basis for 40 million borrowers and
costing more than $500 billion—is undisputedly a “power of vast economic and
political significance.” West Virginia, 142 S. Ct. at 2605. And it is also clear that ED’s
plan relies on as-yet-undiscovered powers in the HEROES Act. This Court should
therefore view the policy with heavy skepticism. See id.
Relief under the Act has never been so broad and included so many individuals
who do not meet statutory criteria. Until COVID-19, ED “generally invoked the
HEROES Act relatively narrowly to grant relief to limited subsets of borrowers, such
as deployed military service members or victims of certain natural disasters.” Kevin
M. Lewis & Edward C. Liu, The Biden Administration Extends the Pause on Federal
Student Loan Payments, Congressional Research Service, LSB10568 Version 3, at 2–
3 (Jan. 27, 2021). 7 Nor has the statute ever been used to broadly cancel loan principals
before. See Department of Education, Office of the General Counsel, Memorandum to
Betsy DeVos, Secretary of Education 6 (Jan. 12, 2021). 8 Recasting the HEROES Act
from a statute permitting limited modifications to one that can sweep away debt for
40 million people and effectively spend more than $500 billion “effects a fundamental
7 https://crsreports.congress.gov/product/pdf/LSB/LSB10568.
8 https://static.politico.com/d6/ce/3edf6a3946afa98eb13c210afd7d/ogcmemohealoans.pdf.
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revision of the statute, changing it from one sort of scheme . . . into an entirely
different kind.” West Virginia, 142 S. Ct. at 2596.
Congress itself has struggled over the question of whether to cancel studentloan principals. See Student Loan Debt Relief Act of 2019, S. 2235, 116th Cong.
(2019); Income-Driven Student Loan Forgiveness Act, H.R. 2034, 117th Cong. (2021).
Given the inevitably controversial nature of such a program, it is “doubt[ful] that
Congress intended to delegate decisions of such economic and political significance”
to the Executive in the HEROES Act; and it is equally doubtful that that power lay
dormant in that statute all along in the “oblique” words of § 1098bb. See West
Virginia, 142 S. Ct. at 2596, 2609.
d.
The statute should be read to avoid constitutional
questions
Even if the HEROES Act could bear the weight of ED’s extraordinary,
unilateral actions, the Court should construe the statute to avoid “serious
constitutional problems, . . . unless such construction is plainly contrary to the intent
of Congress.” Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Eng’rs, 531
U.S. 159, 173 (2001) (simplified). The Act contains important limits to ED’s
discretion, including the requirements under § 1098bb(a)(2)(A). But those limitations
would be rendered meaningless if the statute were to be construed as allowing ED to
freely grant waivers or modifications to individuals who are not financially worse off
with respect to their student loans because of their status as affected individuals.
Such a construction would violate the non-delegation doctrine and must be rejected.
See AFL-CIO v. Am. Petroleum Inst., 448 U.S. 607, 645–46 (1980) (plurality opinion).
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2.
The Statute Violates the Non-Delegation Doctrine
The Secretary’s authority to waive or modify statutory provisions under the
HEROES Act itself violates the non-delegation doctrine, whether or not the statute
contains an intelligible principle. Whether an act has a “legislative character” is
“confirmed by the character of the Congressional action it supplants.” INS v. Chadha,
462 U.S. 919, 953 (1983). By authorizing the Secretary to waive and modify a statute,
then replace it with “the terms and conditions to be applied in lieu of such statutory
. . . provisions,” 20 U.S.C. § 1098bb(b)(2), the Act permits the Secretary to supplant
the Congressional action of legislative amendment.
The waiver authority is substantially the same as the line-item veto
disapproved in Clinton v. City of New York, 524 U.S. 417 (1998). Since waiver
“prevents the [waived] item from having legal force or effect,” the “legal and practical
effect” of waiver is to “amend[] . . . Acts of Congress,” even if it does not formally
“effect a repeal.” Id. 437–39. It does not matter that waiver does not formally “effect
a repeal”; what matters is the relevant statutory provisions became “entirely
inoperative as to” the borrowers under ED’s program. See id. at 441.
While Clinton acknowledged that Marshall Field & Co. v. Clark, 143 U.S. 649
(1892), upheld a foreign policy statute requiring the President to suspend statutes
under certain circumstances, Field does not control here. Suspension under Field is
allowed only if “Congress itself ma[k]e[s] the decision to suspend or repeal the
particular provisions . . . upon the occurrence of particular events,” whereupon the
Executive “ha[s] a duty to suspend.” Clinton, 524 U.S. at 443, 445. This prevents the
Executive from “effect[ing] the repeal of laws[] for his own policy reasons.” Id. at 445.
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Moreover, the Field suspensions were “in the foreign affairs arena, [where] the
President has a degree of discretion and freedom . . . which would not be admissible
were domestic affairs alone involved.” Id.
Here, not only is higher-education financing purely a domestic matter, but
unlike the Field suspensions, the Secretary does not have a duty to issue waivers or
modifications; he “may waive or modify” statutory provisions. 20 U.S.C.
§ 1098bb(a)(1) (emphasis added). Though the Secretary may do so only in service of
statutory goals, see id. § 1098bb(a)(2), his discretion in choosing whether and when to
do so allows “his own policy reasons”—and not Congress—to determine the existence
and timing of a waiver. See Clinton, 524 U.S. at 445. Furthermore, the Secretary has
the discretion to waive provisions “as [he] deems necessary,” 20 U.S.C. § 1098bb(a)(1),
so he controls which statutory provisions he waives and what “terms and conditions”
he replaces them with, id. § 1098bb(b)(2). That is, he controls the contents of the
statutory amendment.
The effects of this discretion are evident here. The Secretary’s discretion over
how to enact a waiver was to produce debt cancelation, fulfilling a long-term priority
of the President and his political party. Cf. Student Loan Debt Relief Act of 2019, S.
2235, 116th Cong. (2019). The Secretary’s choice of whether to enact debt cancelation
was thoroughly infected with non-statutory considerations, including the rising cost
of education “[s]ince 1980” and the aim of “[a]dvanc[ing] racial equity.” See FACT
SHEET 1. And the Secretary’s choice of when to enact debt cancellation was aimed
not at the heart of the pandemic, but at a midterm congressional election that will
33
take place long past the peak of the pandemic. It cannot be said that “Congress itself
made the decision” to enact debt cancellation in early October of an election year
through the HEROES Act’s waiver provision. Clinton, 423 U.S. at 445.
The statute permits the Secretary to suspend the law, to “modify” it with his
own “terms and conditions,” 20 U.S.C. § 1098bb(a)(1), (b)(2), and to do so when and
how “[he] deems necessary,” id. § 1098bb(a)(1). The statute thus bestows the
Executive with lawmaking power in violation of Article I of the Constitution.
II.
APPLICANTS AND THE CLASS THEY REPRESENT WILL SUFFER
IRREPARABLE HARM
Applicants must show they are “likely to suffer irreparable harm before a
decision on the merits can be rendered.” Winter, 555 U.S. at 22. “Imposition of
monetary damages that cannot later be recovered for reasons such as sovereign
immunity constitutes irreparable injury.” Chamber of Com. of U.S. v. Edmondson,
594 F.3d 742, 770–71 (10th Cir. 2010).
Potentially millions of members of the proposed class face irreparable harm
from the automatic tax liability that loan cancellation will impose on them. If ED is
not enjoined, there is no way to recover that loss. Individuals in Indiana, for instance,
would become liable for more than $500 in state income tax as soon as ED
automatically cancels $10,000 of their outstanding loans. See Ind. Code. § 6-3-21(b)(3). ED estimates that 856,400 borrowers in Indiana will be eligible for loan
cancellation, with 555,500 eligible for Pell Grant cancellation of up to $20,000. See
FACT SHEET 2.
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But the class is even larger, and potentially millions face the same irreparable
harm. At least five other states will tax cancellation as income. See Ark. Code § 2651-404(b)(1); Minn. Stat. § 290.01(19)(f); Miss. Code § 27-7-15(4)(mm); N.C. Stat. §
105-153.5(c2)(22); Wis. Stat. § 70.01. And ED expects more than 3.5 million borrowers
in those states will have their loans canceled. See FACT SHEET 2. But there is no
way for Applicants, or anyone else, to recover for the new tax bill, even though ED’s
actions are unlawful, because Section 702 of the Administrative Procedure Act forbids
monetary damages against the federal government. See California v. Azar, 911 F.3d
558, 581 (9th Cir. 2018) (“harm is irreparable here because the states will not be able
to recover monetary damages” because of 5 U.S.C. § 702). Those harms are
irreparable.
III. THE INJUNCTION IS EQUITABLE AND IN THE PUBLIC INTEREST
A party seeking relief must demonstrate “that the balance of equities tips in
[its] favor, and that an injunction is in the public interest.” Winter, 555 U.S. at 20.
“These factors merge when the Government is the opposing party.” Nken v. Holder,
556 U.S. 418, 435 (2009). A government “does not have an interest in enforcing a law
that is likely” invalid. Edmondson, 594 F.3d at 771. Instead, “‘the public interest will
perforce be served by enjoining the enforcement of the invalid provisions of [] law.’”
Id. (citation omitted). Thus, this Court has held that when a rule exceeds an agency’s
authority, it should not “weigh [] tradeoffs” between its intended effect and harms.
NFIB v. OSHA, 142 S. Ct. 661, 666 (2022). “In our system of government, that is the
responsibility of those chosen by the people through democratic processes.” Id.
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Simply—“[t]he public interest is served by compliance with the APA.” California, 911
F.3d at 581; see also Ala. Ass’n of Realtors, 141 S. Ct. at 2490 (“[O]ur system does not
permit agencies to act unlawfully even in pursuit of desirable ends,” such as the
public’s “strong interest in combating the spread of the COVID-19 Delta variant.”).
ED has not only exceeded its authority under the HEROES Act but has also
violated constitutional limits. They thus have no legitimate interest in avoiding an
injunction. Huge numbers of borrowers face the immediate possibility of unwanted,
and unlawful, tax liability through automatic cancellation, while every American will
foot the half-trillion-dollar bill for ED’s improper actions. See Abbott Lab’ys v. Mead
Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992) (this factor considers “the consequences
of granting or denying the injunction to non-parties.”). The public interest lies with
adherence to the “democratic processes” and not ED’s actions. See NFIB, 142 S. Ct.
at 666.
Even if none of this were so, the public interest would not be harmed by an
injunction. Loan repayments and interest accrual are still paused, so no borrower will
be disadvantaged by an injunction that allows the Seventh Circuit to consider
Applicants’ claims on the merits in an orderly fashion.
CONCLUSION
This Court should enjoin ED’s cancellation policy pending appeal.
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DATED: November 1, 2022.
Respectfully submitted,
/s/ Caleb Kruckenberg
CALEB KRUCKENBERG
Counsel of Record
Pacific Legal Foundation
3100 Clarendon Blvd., Suite 1000
Arlington, VA 22201
202-888-6881
CKruckenberg@pacificlegal.org
MICHAEL A. POON
555 Capitol Mall, Ste 1290
Sacramento, CA 95814
MPoon@pacificlegal.org
Counsel for Applicants
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.