Opposition Brief — Jackson v. Culinary School of Washington, Ltd.

——- —_ -—_ " —Tw a ames

In the Supreme Court of the Thuted States

{) | PV 1d

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSTTION

a

QUESTIONS PRESENTED

1. Whether the court of appeals, which was not

exercising jurisdiction based upon diversity of citizen-

ship, erred in failing to apply the choice of law rules of

the forum State.

2. Whether a federal court may decline to entertain an

action for declaratory relief that presents complicated

choice of law, preemption, and local law issues that could

better be decided in future proceedings.

(1)

TABLE OF CONTENTS

Page

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SITTIN, Gr cnrisinisihinsignqqnavasiensidsepeceeseubeourerenereaneveseverenaredets - 1

PBEITTS,. ccscccccocccceueoeers pep baducuesecesenuerteuseveusvewseneveveceesoorosvoces 2

SUIIIIIIIIIL o<ccdudcoudinsunvepntetoovaseteoresccscsunesroubeneveoroveveorecnecooonenes 5

III cnt cdeeeatinineendenentbesevatarianereienmenedanpaserenenes is 16

TABLE OF AUTHORITIES

Cases:

Abbott Lab. v. Gardner, 387 U.S. 136 (1967) ................. 15

Brillhart v. Excess Ins. Co. of America, 316 U.S. 491

I ccaeiniieabaiincrtin 13, 14

Century Indem. Co. v. McGillacuty’s, Inc., 820 F.2d 269

SEEN AL DUPED cctntsievecsecsscsssccvssocsusoprourerscqsenscurenvaceccoseseeee 11

Colorado River Water Conservation Dist. v. United

BED, GEG UE, GED (ICTS) cccvcevccscccvevevccvescesccesesevesess 13, 14

D'Oench, Duhme & Co. v. FDIC, 315 U.S. 447 (1942) .... 7

Day & Zimmermann, Inc. v. Challoner, 423 US. 3

EES Se ee 6

El Dia, Inc. v. Hernandez Colon, 963 F.2d 488

SNE TEENY, TEED ccencnavenddsscccsoeneroreesseqndeucesncepvecsensovencssssoece 14

Erie R.R. v. Tompkins, 304 U.S. 64 (1988) ...............06 8

Ferens v. John Deere Co., 494 U.S. 516 (1990) .............. 6

Green v. Mansour, 474 U.S. 64 (1985) .........:ccccceceeeceeeeees 9, 10

Grider v. Cavazos, 911 F.2d 1158 (5th Cir. 1990) ............. 12

Griffin v. MceCoach, 313 U.S. 498 (1941) oe eeeeeeees 6

Hurst v. United States Dep't of Educ., 901 F.2d 836

SIL IIE! IID sis nrisaentintoenqnnedtsennejunsatmnecnemahnceutetovecte 13

International Union v. Hoosier Cardinal Corp.,

US a eee 7

Klaxon Co. v. Stentor Elec. Mfg. Co., 3138 U.S. 487

I la ra eusagmonnonnsneeeneneeanabapeneoroonpecenes 5, 6,8

Newman-Green, Ine. v. Alfonzo-Larrain, 490 U.S. 826

I sina iat ecedatimmnaninntcneuabeiqeneernneseeresens 6

IV

Cases—Continued: Page

COND sarwsiciencnsisttonspeiapuesiiaeinopeecsbeotiiiieimbibseiauien ssc 12

Public Service Comm'n y Wycoff Co., 344 U.S. 237

CHINEED sisvnivnsansensstusencevoetsssssatennaiiatubhanuoiphbunsaiececeescss 9, 11

Richards v. United States, 369 U.S. 1 (1962) .................. 7

St. Paul Ins. Co. v. Trejo, 39 F.3d 585

eset ac Bocce Be ORT A ER 13

State Farm Fire & Casualty Co. v. Tashire,

SF ET OD COED sesccnseissntipnsitnibltseitentusti acc ice, 6

Tempco Elec. Heater Corp. vy. Omega Eng’g, Inc.,

819 F.2d 746 (7th Cir. 1987) oo. cccccceccecccesecececeeeeceesc....

Thomas v. Bennett, 856 F.2d 1165 (8th Cir. SOD iniisleceneed 13

Transamerica Occidental Life Ins. Co. v. Digregorio,

811 F.2d 1249 (9th Cir. 1987) oo... cccccccecseccoseeeoeees.... 11-12, 14

United States v. Commonwealth of Pennsylvania, Dep't

of Envtl. Resources, 923 F.2d 1071 (3d Cir. | 13

United States vy. Little Lake Misere Land ( 0.,

SE TIA, GUD CEI eccacensctisnacnssnvinsasbieaseanensatcenions ences. ~

United States Fidelity & Guaranty Co. v. Murphy Oil

USA, Inc., 21 F.3d 259 (8th Cir. DU bhatiakt ioe 13-14

Van Dusen v. Barrack, 376 U.S. 612 GEER cocusetutinaseses 7

Wilton v. Seven Falls Co., cert. granted, 115 S. Ct. 571

CRUD <vinincesincetitneievevenieessictsidepdesaaiigesuiunsammusisieessi seca. 9

Statutes and regulations:

Declaratory Judgment Act, 28 U.S.C. 2201 ef ee 11, 14

Pe Nes SEN onan teeeeGkn ee er iene 13

Higher Education Act of 1965, Tit. IV, 20 U.S.C. 1070

OG, scevscujsnuintinaieriinvaninnhdanietnenidaesnaiibdabiiisesdbes ccc: 2

oF Say MUD dicleiniaianiiende te 2

20 U.S.C. 1078(a) (1988 & Supp. V 1993) ......00...c..00ce 2

20 U.S.C. 1078(c) (1988 & Supp. V 1993) ..............0. 2

20 U.S.C. 1078(c)(1) (1988 & Supp. V 1993)... 2

V

Statutes and regulations—Continued:

20 U.S.C. 1078(e)(8) (Supp. V 1998) v..cccccccoccecceee--...

20 U.S.C, 1082(m)(1) (Supp. Vi 1998) vocccccccecscee--...

20 U.S.C. 1087(¢) (Supp. V 1998) cocceccccccccccecceseee.-....

20 U.S.C. 1087(e)(1) (Supp. V 1993) ...ccccccccccescee-ee-...

20 U.S.C. 1087-1 (1988 & Supp. V 1993)...

20 U.S.C. 1095a(b) (Supp. Vo 1998) ccccccccscececcoseses-.....

Be GAA, TOE scrsincstinicecdeimaibaae el

Te OL. SOD svtsiccintocacncnsasenaaaade ne eee

Consumer Credit Protection Act, D.C. Code Ann.

$$ 28-3801 et seq. (1991):

© By sccscasiiutiastecingedtiinamtncede ee

Miscellaneous:

Edwin Borchard, Declaratory Judgments (2d ed. 1941) ..

59 Fed. Reg. (1994):

9. SEADB vcctictimnniccin dee

PP. TOG seccesescsciviimeiisintiiciebianee ee

PD: TD ciccescitiareiieniiate ee

Pp. 22,477 (to be codified at 34 C.F.R. 682.402) .......

Pp. 22,488 (to be codified at 34 C.F.R.

682.410(b)(10)) ..........cccereceeee ieedpenctnietiadanindenies

In the Supreme Court of the Cited States

OcTOBER TERM, 1994

No. 94-886

MICHAEL JACKSON, ET AL., PETITIONERS

v.

CULINARY SCHOOL OF WASHINGTON, LTD., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

BRIEF FOR THE FEDERAL RESPONDENT

IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. Al-A24)

is reported at 27 F.3d 575. The decision of the district

court is set forth in two opinions, a March 26, 1992,

opinion and order (Pet. App. A25-A76) reported at 788 F.

Supp. 1233, and a January 6, 1993, opinion and judgment

(Pet. App. A77-A94) reported at 811 F. Supp. 714.

JURISDICTION

The judgment of the court of appeals was entered on

June 24, 1994. A petition for rehearing was denied on

August 17, 1994. Pet. App. A95. The petition for a writ of

certiorari was filed on November 15, 1994. The juris-

diction of this Court is invoked under 28 U.S.C. 1254(1).

(1)

2

STATEMENT

1. Title IV of the Higher Edueation Act ef 1965

(HEA), 20 U.S.C. 1070 et seq., established the Guaranteed

Student Loan Program (GSLP) to “assist in making

available the benefits of postsecondary education to

eligible students * * * in institutions of higher

education.” 20 U.S.C. 1070(a). Under the GSLP, the

government provides interest subsidies and special

allowances to eligible lenders, see 20 U.S.C. 1078(a),

1087-1 (1988 & Supp. V 1993), and insures against

borrower default, see 20 U.S.C. 1078(c) (1988 & Supp. V

1993). The government does not disburse funds directly

to students. Rather, private lenders advance their own

funds to eligible students; state and private guaranty

agencies guarantee the loans against default; and the

Department of Education acts as reinsurer of 80% to

100% of the state or private guaranty agency’s losses, if

the latter’s diligent collection efforts prove unsuc-

cessful. 20 U.S.C. 1078(c)(1) (1988 & Supp. V 1993). The

Secretary of Education (Secretary) may demand assign-

ment of any defaulted loan on which he has made a

reinsurance payment to a guaranty agency. 20 U.S.C.

1078(c)(8) (Supp. V 1995).

2. Petitioners are 58 former students of the now-

defunct Culinary School of Washington, Ltd. (CSW).

Pet. App. A2. Respondent CSW participated in the

GSLP program between 1982 and 1990, and petitioners

were GSLP-assisted students at the school at various

times between May 1, 1985, and early 1990.’ Jd. at A5, A6.

' During that period, loan application forms were prepared by

guaranty agencies and approved by the Secretary. Pet. App. A4-

A5. As the court of appeals noted (id. at A5 n.5), however,

Congress in 1992 directed the Secretary to develop a common loan

application form to be used by all GSLP participants. See 20

3

CSW _ purported to offer vocational training and

certification in the culinary arts that would qualify

students as gourmet chefs, and it made numerous repre-

sentations regarding quality of instruction, housing,

transportation and job placement services for students.

Jd. at A5. After repeated complaints about the school’s

failure to perform in accordance with its repre-

sentations, CSW filed for bankruptcy protection in

January 1990, and in June 1990 it withdrew its appli-

cation for a renewed operating license and ceased

operations. /d. at A6.

3. In 1991, petitioners filed this action in the United

States District Court for the District of Columbia,

naming as defendants CSW, the lenders on their loans,

the guaranty agencies, and the Secretary. Pet. App. A6-

A7. Petitioners sought declaratory and injunctive relief

against ongoing collection of their loan obligations.

They alleged fraudulent inducement and breach of

contract on the part of CSW, and contended that their

claims against CSW could be asserted as defenses to

enforcement of their loans. Jd. at A7.°

The district court rejected petitioners’ argument that

their claims against CSW could be asserted as defenses

against the lenders and their assignees, holding that

federal law, as established in the HEA, preempts

U.S.C. 1082(m)(1) (Supp. V 1993). That form incorporates the

Federal Trade Commission’s Holder Rule, which preserves all

borrower claims and defenses against subsequent holders of the

loan when the school has a referral or affiliation relationship with

the lender. See note 3, infra. That form may well resolve on a

prospective basis many of the questions presented below.

“ CSW failed to appear, and a default judgment was entered

against it. Pet. App. A7. There is no dispute that petitioners have

valid fraud and breach of contract claims against CSW, but the

now-defunct school is judgment-proof. /d. at A2.

4

application of two sections of the District of Columbia

Consumer Credit Protection Act, D.C. Code Ann. §§ 28-

5807, 28-3809 (1991), on which petitioners relied. Pet.

App. A7; see also id. at A39-A40, A52-A57, A&86-A87.

The district court also rejected petitioners’ claims

based on the Federal Trade Commission’s Holder Rule,*

finding that petitioners had no federal right to enforce

the Rule and that, even in the absence of the notice

required by the Rule, petitioners’ loan agreements did

not violate state law. Pet. App. A7-A&; see also id. at

A42-A51, A&87-A92. Finally, the court granted summary

judgment for the Secretary on petitioners’ claim that

they were entitled to the benefit of the Secretary’s

“origination policy,” under which the Secretary refrains

from collecting on defaulted loans where the lender has

delegated substantial functions to the school. /d. at A8,

A83-A86. The court found that, as a factual matter,

petitioners had failed to demonstrate sufficient dele-

gation to trigger application of the origination policy.

Ibid.

4. The court of appeals affirmed, but on different

grounds. Pet. App. Al-A24. The court of appea!s first

concluded that the district court’s exercise of discretion

to grant or deny declaratory relief was subject to de

novo review on appeal. /d. at A9-A1l2. Applying that

* The Holder Rule, 16 C.F.R. 433.2, provides that it is “an

unfair or deceptive act or practice * * * for a seller, directly or

indirectly,” to accept payment for or to receive a contract when

the contract aoes not contain the following notice:

Any holder of this consumer credit contract is subject to all

claims and defenses which the debtor could assert against the

seller of goods or services obtained pursuant hereto or with the

proceeds hereof. Recovery hereunder by the debtor shall not

exceed amounts paid by the debtor hereunder.

5

standard, the court of appeals determined that

petitioners’ D.C.-law-based claims required “in-depth

preemption analysis” (id. at Al3) and that that analysis

implicated complex choice of law questions. /d. at A15.

Given the multiplicity of jurisdictions in which the

parties were domiciled and in which relevant events

occurred, the court was “unable to say with confidence

that D.C. law will apply in any future coercive action

brought by the declaratory judgment defendants.” Jbid.

The court therefore “refuse{[d| to undertake the highly

speculative inquiry into whether D.C. law, which may or

may not apply in a future coercive action, actually

conflicts with the HEA. To do so would smack uncom-

fortably of an advisory opinion.” Jbid. The court

similarly declined to address petitioners’ other D.C.-law-

based claims, declaring itself “unwilling to engage in the

delicate task of interpreting various local provisions in

the absence of any essurance that such interpretation

will be necessary or useful.” /d. at A17.

Finally, the court of appeals rejected petitioners’

federal claim based on the Secretary’s origination policy.

Pet. App. Al7-A24. The court found no need to determine

whether an origination relationship actually existed

between CSW and the lenders, because the Secretary’s

statements of the origination policy did not amount to

binding rules, and the policy therefore was unenforceable

by petitioners. /d. at A24.

ARGUMENT

The decision of the court of appeals is correct and does

not conflict with any decision of this Court or of any

other court of appeals. Further review is therefore

unwarranted.

l. Invoking Klaxon Co. v. Stentor Electric

Manufacturing Co., 313 U.S. 487 (1941), petitioners

6

contend that the court of appeals’ decision “conflicts

with the decisions of this Court that require federal

courts deciding questions of state law to apply the choice

of law principles of the forum in which they sit.” Pet. 13.

Petitioners’ reliance upon Alaxon and related decisions

(Pet. 14) is misplaced.

The rule announced in Klaxon applies only to cases in

which federal court jurisdiction rests upon diversity of

citizenship. Klaxon, 313 U.S. at 494, 496; see also, e.g.,

Ferens v. John Deere Co., 494 U.S. 516, 519 (1990); Day

& Zimmermann, Inc. v. Challoner, 423 U.S. 3, 3 (1975)

(per curiam); Griffin v. McCoach, 313 U.S. 498, 5038

(1941). Klaxon and its progeny therefore are inapposite

to this case, for the district court’s jurisdiction was

based not upon diversity of citizenship, but upon other

federal jurisdictional provisions, including 28 U.S.C.

1331 (federal question) and the doctrine of pendent

jurisdiction.’ Contrary to petitioners’ assertion, the

court of appeals’ failure to apply Alaxron stemmed not

from its “assumption that the K/axon rule does not apply

to declaratory judgment actions” (Pet. 14), but rather

from the fact that Klaxon does not apply in the cireum-

stances of this case.

* Although petitioners’ pleadings in the district court invoked

the diversity statute, 28 U.S.C. 1332, as one basis for jurisdiction, it

is clear from the face of the pleadings that complete diversity was

lacking. See Complaint 74 III(1) (C.A. App. 147-148), IITM0) (C.A.

App. 148) (both lead plaintiff and CSW domiciled in Washington,

D.C.); Amended Complaint 44 III1(1) (C.A. App. 249), I11(62) (C.A.

App. 258) (same); see also Pet. App. Al5. The diversity statute has

been interpreted to require complete diversity. See Newman-

Green, Ine. v. Alfonzo-Larrain, 490 U.S. 826, 829 & n.1 (1989);

State Farm Fire & Casualty Co. v. Tashire, 3886 U.S. 523, 580-531

(1967).

7

This Court has expressly declined to decide whether

the Klaron rule applies outside the realm of diversity

jurisdiction. See D’Oench, Duhme & Co. v. FDIC, 315

U.S. 447, 457 (1942) (“Whether the rule of the Klaxron

case applies where federal jurisdiction is not based on

diversity of citizenship, we need not decide.”). In the

more than half a century since D’Oench, Duhme was

decided, the Court has never resolved the issue left open

in that case. See, ¢.g., International Union v. Hoosier

Cardinal Corp., 383 U.S. 696, 705 n.8 (1966); Richards vy.

United States, 369 U.S. 1, 7 (1962). Thus, Klaxon does

not control the instant case, and there is no conflict

between Klaxon and the court of appeals’ decision.” Nor

would this be an appropriate case in which to consider

whether Alaon’s choice of law rule should be extended

to non-diversity cases, because the court of appeals did

not address the applicability of the Klaxon rule or decide

what law should be chosen to resolve any non-federal law

issues in this case. It pretermitted any such inquiry by

concluding that declaratory relief should be denied as a

matter of equitable discretion.

® Petitioners erroneously assert that the court of appeals

concluded that “declaratory relief must be denied in order to allow

the defendant to select the forum,” and argue that this decision

conflicts with the rationale of Van Dusen v. Barrack, 376 U.S. 612

(1964). Pet. 15. As discussed more fully below, the court of

appeals decided only that the unique posture of the current case

made it infeasible and unwise for the court to attempt to resolve

the choice of law issues presented, not that the declaratory

judgment defendants should, as a normative matter, be given their

choice of forum. See Pet. App. A15-A16; see also Tempco Elec.

Heater Corp. vy. Omega Eng’g, Inc., 819 F.2d 746, 749 (7th Cir.

1987) (rejecting argument that discretionary dismissal “deprived

[plaintiff] of its ‘right’ to bring a declaratory judgment action in

the forum of its choosing”).

8

Even if the court of appeals had reached the issue,

since this is not a diversity case, refusal to apply the

choice of law rules of the forum State would not “disturb

the equal administration of justice in coordinate state

and federal courts sitting side by side.” Klaxon, 313

U.S. at 496 (citing Erie R.R. v. Tompkins, 304 US. 64,

74-77 (1938)). The considerations of comity that underlie

Krie and Klaxon are not implicated in the absence of

diversity jurisdiction, since the State does not have a

comparable stake in application of its choice of law rules

when the federal court is not sitting essentially in the

local court’s stead. In non-diversity cases, a failure to

apply state choice of law rules does not “do violence to

the principle of uniformity within a state.< Klaron, 313

LS. at 496.

In short, it simply does not follow from Klaxon or its

progeny that a district court must apply the choice of

law rules of the forum in a non-diversity case. Rather, it

may well be more appropriate for a federal court

exercising federal jurisdiction to have latitude to weigh

various factors—e.g., express or implicit congressional

intent, the nature of the federal question presented, the

existence of contractual choice of law provisions, and the

relationship between the forum and the cause of action—

in making its choice of law determination. As this Court

explained in United States v. Little Lake Misere Land

Co., 412 U.S. 580, 592 (1973), in questions “arising from

and bearing heavily upon a federal regulatory program

* * * the choice-of-law task is a federal task for federal

courts.” See also North Dakota v. United States, 460

U.S. 300, 318 (1983) (same; “state law may be borrowed if

appropriate”) (emphasis added).

2. Petitioner.. alse argue that the court of appeals’

decision “substantially restricts the availability of

declaratory relief in the federal courts.” Pet. 16.

9

Contrary to petitioners’ portrayal, the D.C. Circuit’s

decision was tailored to the unique and complicated facts

of the instant case, and therefore was quite narrow. The

court reasonably exercised its discretion® to deny

declaratory relief because, on the instant facts, such

relief would “serv{e]| no useful purpose as a final

determination of rights.” Public Service Comm’n v.

Wycoff Co., 344 U.S. 237, 247 (1952); see also Green v.

Mansour, 474 U.S. 64, 73 & n.2 (1985). The decision

below therefore hews to this Court’s admonition that

federal courts should avoid “futile or premature

interventions.” Wycoff, 344 U.S. at 243.

The parties in this case include 58 borrowers who

“hail from all over the country,” numerous lenders and

primary guaranty agencies based in five States, a

culinary school based in Washington, D.C., and the

Secretary of Education, who is responsible for admini-

stering the nationwide federal student loan program.

Pet. App. A3, Al5. Fifty-eight individual loan agree-

ments are involved, all of which apparently were signed

by the borrowers in the District of Columbia, but

approved by the lenders in various States outside the

District. /d. at Al5. All of the agreements, moreover,

® As noted above, the D.C. Circuit adopted a de novo standard

for review of a district court’s exercise of discretion to grant or

deny declaratory relief. Pet. App. All-Al2. There is no reason

for the Court to hold this case pending its decision in Wilton v.

Seven Falls Co., cert. granted, 115 S. Ct. 571 (Nov. 28, 1994) (No.

94-562), which presents, inter alia, the question of the proper

standard for appellate review in such cases. Petitioners have not

directly presented this question in their petition; they characterize

it as a “subsidiary” question; and they acknowledge that it is “not

clear whether [the standard of review applied] was determinative

of the outcome of the judgment below.” Pet. 23 n.12. Accord-

ingly, the petition should not be held pending disposition of Wilton.

10

contained express choice of law provisions specifying

non-D.C, law. /d. at Al6. Federal law, as embodied in the

HEA, provided the backdrop for each of those federally

guaranteed loans, yet petitioners sought a declaration

that D.C. consumer protection laws and regulations

would provide defenses to enforcement of their loans.

Given the foregoing state of facts and circumstances,

the court of appeals found itself “unable to say with

confidence that D.C. law will apply in any future

coercive action brought by the declaratory judgment

defendants.” Pet. App. Al5. The court of appeals

therefore properly “refuse([d| to undertake the highly

speculative inquiry into whether D.C. law, which may or

may not apply in a future coercive action, actually

conflicts with the HEA.” Jbid.’ The court of appeals

correctly added that “[t]lo do so would smack uneom-

fortably of an advisory opinion.” /bid.

It is beyond dispute that “the declaratory judgment

statute is an enabling Act, which confers a discretion on

the .curts rather than an absolute right upon the

litigant.” Green v. Mansour, 474 U.S. at 72 (internal

quotation marks omitted). “The propriety of issuing a

declaratory judgment may depend upon equitable

considerations, and is also informed by the teachings and

experience concerning the functions and extent of

federal judicial power.” Jbid. (internal citation and

’ Even if petitioners are correct that D.C. choice of law

principles should be applied, it does not follow that those principles

would require the application of D.C. substantive law (including

the consumer protection provisions on which petitioners rely).

Petitioners have failed to show, for example, that D.C. choice of

law principles would not call for application of the law of the State

where each petitioner resides or where the guaranty agreements

were entered into, or of the non-D.C. law that is called for under

the individual loan agreements.

1]

quotation marks omitted). Federal courts exercising

their discretion under the Declaratory Judgment Act

are guided by the well-settled principle that declaratory

relief is warranted only where a judgment will “clarif|y|

and settl[e] the legal relations in issue” and will

“terminate and afford relief from the uncertainty, in-

security, and controversy giving rise to the proceeding.”

Edwin Borchard, Declaratory Judgments 299 (2d ed.

1941); see also Wycoff, 344 U.S. at 242-243 (declaratory

relief available only when the “controversy admit[s| of

specific relief through a decree of a conclusive character,

as distinguished from an opinion advising what the law

would be upon a hypothetical state of facts”) (citation

omitted).* The court of appeals’ conclusion that those

purposes would not be served in the instant case was

reasonable and does not conflict with decisions of this

Court or other courts of appeals. Petitioners cite no

case, and we have found none, that involves similarly

complicated questions of preemiption, choice of law, and

interpretation of local law.”

* These principles support the court of appeals’ additional

“unwilling[ness| to engage in the delicate task of interpreting

various local provisions in the absence of any assurance that such

interpretation will be necessary or useful.” Pet. App. A17.

* To the extent remotely analogous decisions exist, they support

the court of appeals’ ruling. In Century Indemnity Co. v.

McGillacuty’s, Inc., 820 F.2d 269 (1987) (per curiam), for example,

the Eighth Circuit affirmed the dismissal of a suit by an excess

liability insurer seeking a declaration of non-liability. Because the

underlying tort liability of the insured had not been established and

was being adjudicated in a pending state court action, the district

court dismissed the federal suit because “there mlight] never be

any need to decide how the [insurance] coverage should be

divided.” Jd. at 270. The court of appeals affirmed, noting that

“{ijt would be a misuse of limited judicial resources to decide

hypothetical issues.” Jd. at 271. See also Transamerica Occidental

12

The court of appeals’ ruling thus is narrow and does

not “substantially restric{t] the availability of declara-

tory relief.” Pet. 16. At most, it stands for the emin-

ently reasonable proposition that declaratory relief is

unavailable in a limited class of cases—such as the

instant case—that involve variously situated parties and

raise exceptionally complicated choice of law, pre-

emption, and local law issues, where a resolution of the

questions presented might prove wholly unnecessary.

Petitioners’ assertion that the court of appeals’ holding

represents a major limitation upon the power of the

federal courts to grant declaratory relief is unfounded.

3. Nor is there merit to petitioners’ contention that

the decision below “may deny petitioners any op-

portunity for adjudication of the merits of their claims

that * * * penalties and collection actions are unlawful

because their loans are subject to valid defenses.” Pet.

17. Petitioners will have a fully adequate opportunity to

litigate their claims and defenses in any future

proceedings to collect on the loans or by challenging any

potential wage garnishments or tax refund intercepts.

See 20 U.S.C. 1095a(b) (Supp. V_ 1993); 34 C.F.R.

30.53(b)(3); 59 Fed. Reg. 22,462, 22,473-22,475, 22,488

(1994) (to be codified at 34 C.F.R. 682.410(b)(10)); see also,

e.g., Grider v. Cavazos, 911 F.2d 1158 (5th Cir. 1990);

Life Ins. Co. v. Digregorio, 811 F.2d 1249, 1251-1252, 1255 n.5 (9th

Cir. 1987) (affirming district court’s abstention where later-filed

state action pending; case involved “intricate interplay of federal

and state laws”; declaratory judgment plaintiff essentially

“sf[ought] a federal forum to interpret its contract”; and state

courts were competent to determine preemption issues); Pacific

Employers Ins. Co. v. M/V Capt. W.D. Cargill, 751 F.2d 801, 804

(5th Cir.) (affirming dismissal of “anticipatory” action for

declaration of non-liability under insurance contract), cert. denied,

474 U.S. 909 (1985).

ee ee ee ee

13

Hurst v. United States Dep’t of Educ., 901 F.2d 836 (10th

Cir. 1990); Thomas v. Bennett, 856 F.2d 1165 (8th Cir.

1988). Petitioners correctly concede (Pet. 21 n.10),

moreover, that nothing in the court of appeals’ decision

precludes a borrower from whom funds have already been

collected from instituting an action to recover those

funds.

Contrary to petitioners’ contention (Pet. 17-19), there

is no conflict between the decision below and this Court’s

holding in Brillhart v. Excess Insurance Co. of America,

316 U.S. 491 (1942). Brillhart set forth the factors a

court must consider when dismissal of a declaratory

judgment action is grounded on the pendency of a state

court proceeding. /d. at 494-495. It is not disputed that

no parallel proceeding was pending in this case, and the

Brillhart Court did not “attempt a comprehensive

enumeration of what in other cases may be revealed as

relevant factors governing the exercise of * * *

discretion” to deny declaratory relief. Id. at 495.

Petitioners’ reliance (Pet. 18) on Colorado River

Water Conservation District v. United States, 424 U.S.

800 (1976), and its progeny is also misplaced. As

numerous courts of appeals have recognized, the

abstention principles addressed in the Colorado River

line of authority do not strictly apply to suits for

declaratory relief under 28 U.S.C. 2201, for a “district

court’s discretion under the Declaratory Judgment Act

is significantly greater than under Colorado River.”

United States v. Commonwealth of Pennsylvania, Dep't

of Envtl. Resources, 923 F.2d 1071, 1074 (3d Cir. 1991).

See also St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 & n.6

(5th Cir. 1994) (dismissal of declaratory judgment action

need not satisfy “exceptional circumstances” test of

Colorado River); United States Fidelity & Guaranty

Co. v. Murphy Oil USA, Inc., 21 F.3d 259, 263 (8th

14

Cir. 1994) (Colorado River factors merely inform

district court’s exercise of “expansive discretion” to

abstain from hearing declaratory judgment actions);

Transamerica Occidental Life Ins. Co. v. Digregorio,

S11 F.2d 1249, 1254 (9th Cir. 1987) (“district courts’

special jurisdictional discretion as to declaratory

judgment suits [is] independent of the Colorado River

analysis”).'”

Here, the court of appeals has in effect determined that

a future action brought against individual petitioners (or

a future challenge by one or more petitioners to a

proposed wage garnishment or tax refund offset) would

be a “better” mechanism for adjudicating the defenses

that petitioners now seek to have resolved in an

anticipatory manner. See Brillhart, 316 U.S. at 495;

Borchard, supra, at 303 (“where the court believes that

more effective relief can and should be obtained by

another procedure * * * it is justified in refusing a

declaration because of the availability of another

remedy”). That conclusion was reasonable because,

inter alia, in the context of a specific, individual

proceeding, the choice of law issues can more easily be

resolved.

Nor is it material that no case is currently pending in

which petitioners’ claims may be litigated. The court of

appeals has prudently chosen not to adjudicate complex

choice of law, preemption, and state law interpretation

issues in a vacuum. If, in a later action brought against a

Petitioners’ quotation from Colorado River is particularly

inapposite (Pet. 18), for the “virtually unflagging obligation” (424

U.S. at 817) of federal courts to exercise jurisdiction granted them

does not apply in the case of the discretionary jurisdiction con-

ferred by the Declaratory Judgment Act. El Dia, Ine. vy.

Hernandez Colon, 963 F.2d 488, 493 (1st Cir. 1992).

15

particular petitioner, D.C. law were held not to govern

the particular loan agreement at issue, any declaratory

judgment as to the effect of D.C.-law-based defenses

would prove to have been purely an “advisory opinion.”

Pet. App. Al5. When petitioners actually are faced with

imminent injury, they will have the opportunity to

litigate all of their claims. Cf. Abbott Lab. v. Gardner,

387 U.S. 136, 148-149 (1967) (ripeness doctrine aims at

“avoidance of premature adjudication,” and requires

court “to evaluate both the fitness of the issues for

judicial decision and the hardship to the parties of

withholding court consideration”).

4. Finally, changes in the law since this action was

commenced also underscore the wisdom of the court of

appeals’ approach and militate strongly against review

here. As the court of appeals recognized (Pet. App. A5

n.5), the 1992 amendments to the HEA are likely to

eliminate on a prospective basis many of the issues

presented in this case. Moreover, the amendments also

may provide protection to many of the petitioners in the

instant case, thereby eliminating any need for resolution

of their anticipatory defenses. See 20 U.S.C. 1087(c)(1)

(Supp. V 1993) (“If a [student] borrower who received, on

or after January 1, 1986, a loan made, insured, or

guaranteed under this part * * * is unable to complete

the program in which such student is enrolled due to the

closure of the institution * * *, then the Secretary

shall discharge the borrower's liability on the loan

(including interest and collection fees) by repaying the

amount owed on the loan”).'' Thus, review by this Court

is unwarranted.

'! A number of petitioners allege that the school closed prior to

the completion of their program of study. See, e.g., Amended

Complaint 4 11(150) (C.A. App. 282) (Heriberto Vasquez); id.

16

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

DREW'S. Days. II]

Solicitor General

FRANK W. HUNGER

Assistant Attorney General

BARBARA C. BIDDLE

JOHN S. KOPPEL

Attorneys

FEBRUARY 1995

q I1(177) (C.A. App. 294) (Maria Vasquez); id. 4 I1(180) (C.A.

App. 295) (Mathew Depompa). Those petitioners and others may

qualify for discharge of their loans under the Secretary’s regu-

lations implementing Section 1087(c). 59 Fed. Reg. 22,462, 22,464-

22,472, 22,477 (1994) (to be codified at 34 C.F.R. 682.402).

Cen A SE Tn