Update on ABA lawsuit against Department of Education

The lawsuit has taken an interesting turn with the ABA asserting the court should take judicial notice of 3 e-mails between FedLoan Servicing employees. These emails were obtained under FOIA requests and apparently, took 2 years and a court order for the e-mails to be finally produced.

In the December 8, 2017 filing, the ABA argues that these 3 juicy e-mails “provide irrefutable evidence of the Department’s changed interpretations of the relevant statutory and regulatory terms at issue in this case…This evidence erases any doubt that the Department’s change in position reflected not just “corrections” of individual adjudicatory decisions, but a wholescale shift in its approach to determining PSLF employment eligibility” (PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE).

Let’s take a look inside the e-mails, as discussed in PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE:

The first two emails, Exhibits C and D, are emails sent from FedLoan Servicing employees recognizing that FedLoan Servicing’s employment certification form (“ECF”) manual needs to be updated based on “recent guidance” from the Department. In these emails, members of FedLoan Servicing’s compliance department recognize that “[t]here has been some guidance from FSA [the Department’s Federal Student Aid office] that has changed” since PHEAA’s ECF manual was updated, notably that the Department has “advised a private not-for-profit (non-501(c)(3)) organization should be evaluated based on their ‘primary purpose.’” Ex. C; Ex. D.

The third email further emphasizes that evaluating an organization based on its “primary purpose” was a novel approach to the approval process: Based on guidance FSA had originally gave [sic] us, we were approving organizations . . . as private not-for-profit providing public health service[s] as long as they had at least one position that would qualify . . . . However, just a few months ago (around January 2017), FSA introduced a new concept in the review, “primary purpose.” We [FedLoan Servicing] questioned this new guidance, and FSA unfortunately agreed that organizations such as this would ultimately not qualify for PSLF purposes and apologized for the guidance they provided in the past with the understanding we had approved such organizations. Ex. E at 1 (emphasis added).

These emails provide clear evidence that the Department’s “primary purpose” standard was a new interpretation that directly conflicted with its previous guidance to FedLoan Servicing on how to assess employer eligibility. As a result of this new interpretation, FedLoan Servicing was required to retract the approval status of numerous previously approved employers.

 

Despite the opposition from the ED, the ABA further pressed in the next reply filed December 29, 2017 that, “the extra-record emails at issue here specifically relate to instructions and guidance FedLoan Servicing received from the Department concerning interpretation changes.” PLAINTIFFS’ REPLY IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE.

The ABA piles it on:

Plaintiffs submit the emails to further demonstrate that the Department’s purported reason for its retroactive revocations—that its contractor simply erred in applying the Department’s consistent interpretation—is patently false. See Pls.’ Reply at 9 n.3. The Department maintains that its about-face can be attributed solely to its desire to correct “errors” committed by its chosen PSLF contractor, FedLoan Servicing. The emails, however, show multiple FedLoan Servicing employees citing “recent guidance” from the Department introducing a “new concept” into FedLoan Servicing’s review of employment certification forms, namely, that private not-for-profit public service organizations are to be evaluated according to their “primary purpose.” Pls.’ Mem. in Supp. of Pls.’ Supplemental Mot. to Allow for Extra-Record Review (“Pls.’ Suppl. Mot.”) at 4-5 (ECF No. 35). It is therefore not surprising that the Department now wishes to suppress communications among FedLoan Servicing employees that discuss the Department’s instructions for determining PSLF eligibility. Far from exculpating the Department from any improper action, the emails show employees of its chosen contractor discussing candidly (i) the new standard the Department itself instructed FedLoan Servicing to apply, (ii) the fact that this standard marked a deviation from past guidance, and (iii) the revocation of PSLF eligibility that the application of the new standard necessitated. Id. at 4-5.

It is telling that the Department has offered no serious explanation for why the extra-record email evidence uncovered by Plaintiffs does not bear directly on the issue of the Department’s changed interpretations. It cannot do so because the significance of the emails is stark and clear: the emails confirm that the Department altered its interpretations of the statutory and regulatory terms.

PLAINTIFFS’ REPLY IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE.

 

Want to read the case? Check it out below (click on image for full document):

 

PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE

 

DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE

 

PLAINTIFFS’ REPLY IN SUPPORT OF PLAINTIFFS’ SUPPLEMENTAL MOTION TO ALLOW FOR EXTRA-RECORD REVIEW OR, IN THE ALTERNATIVE, TO ALLOW FOR JUDICIAL NOTICE

 

We will keep you posted on updates to this case.

 

 

 

 

 

 

 

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