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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1995
- **Citation:** 515 U.S. 1139

## Text

——- —_ -—_ " —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
CpbebeRe BOOW ..cccccrcvceccevecscevscccsnccesevesessensoncecesvovvesesesecosesers |
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1230%3A3. Public record. Not legal advice.