Infusino v. Cardona

• Decision Date: 04 November 2022
• Docket Number: 19-cv-3162 (CRC)
• Parties: ROBERT J. INFUSINO, et al., Plaintiffs, v. MIGUEL A. CARDONA, in his official capacity as U.S. Secretary of Education, et al., Defendants.
• Court: U.S. District Court — District of Columbia

ROBERT J. INFUSINO, et al., Plaintiffs,
v.
MIGUEL A. CARDONA, in his official capacity as U.S. Secretary of Education, et al., Defendants.

No. 19-cv-3162 (CRC)

United States District Court, District of Columbia

November 4, 2022

MEMORANDUM OPINION AND ORDER

CHRISTOPHER R. COOPER UNITED STATES DISTRICT JUDGE

Plaintiffs were formerly enrolled as students at two for-profit art institutes. After learning that the schools were not accredited during a portion of the time they attended, Plaintiffs brought this lawsuit. Due to the loss of accreditation, Plaintiffs claimed that the student loans issued to them by the Department of Education (the “Department”) were unlawful, and they sought a declaratory judgment to that effect. The Department voluntarily cancelled the loans in question shortly after Plaintiffs filed suit, and the parties agreed to a settlement in 2020. Before the Court is Plaintiffs' petition for attorneys' fees and costs under the Equal Access to Justice Act (“EAJA”). For the reasons explained below, the Court finds that Plaintiffs are prevailing parties and will grant an award of fees, although in a smaller amount than Plaintiffs request.

I. Background

Title IV of the Higher Education Act of 1965 (“HEA”), 20 U.S.C. § 1070 et seq., governs the administration of the federal student loan program. Compl. ¶ 17. To participate in Title IV programs, for-profit colleges must be accredited by a recognized accrediting agency, and nonprofit schools must be either accredited or pre-accredited. Id.; see 34 C.F.R. §§ 600.4(a), 600.5(a).

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Plaintiffs attended two for-profit art schools, the Illinois Institute of Art (“IIA”) and the Art Institute of Colorado (“AIC”). Compl. ¶ 1. In January 2018, a nonprofit corporation-the Dream Center Foundation-purchased the schools while the Plaintiffs were still students. See id. ¶¶ 10-13, 24. The Dream Center applied to the Department of Education to convert the schools to nonprofit status, as defined by the Department's regulations. Id. ¶ 26. The Dream Center also applied to the Higher Learning Commission (“HLC”), the accrediting agency that had accredited the schools before the Dream Center's purchase, to approve the change in ownership and retain the schools' accreditation. Id. ¶ 34. On September 12 2017, the Department sent the Dream Center a letter regarding its request for nonprofit status, stating that after a preliminary review, it did “not see any impediment” to approving nonprofit status, but that formal approvals were “contingent on” the schools' further demonstration of “compliance with the requirements of 34 C.F.R. § 600.20(g) and (h), the Department's review and approval of any submissions required by those regulatory provisions, and any further documentation and information requested by the Department.” Compl. Ex. C at 2. The Department added that the Dream Center would “have to submit additional documentation and information to confirm” that it met all the regulatory elements of nonprofit status. Id. at 6.

On November 16, 2017, HLC sent the Dream Center a letter-cc'ing the Department- stating that the Board had voted to approve the schools' change in ownership “subject to the requirement” that the schools enter “Change of Control Candidacy Status,” a pre-accreditation status during which the schools would have to demonstrate their full compliance with HLC's criteria for accreditation. See Compl. Ex. E at 1-2, 7. The schools accepted HLC's pre-accreditation offer. Compl. ¶ 37; see Compl. Ex. F. On February 20, 2018, the Department executed temporary program participation agreements (“TPPAs”) with the schools allowing

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them to participate in federal student loan programs, despite their pre-accreditation status. Compl. ¶ 41.

Sometime in the next several months, the Department came to the belated realization that, because of the change of ownership, the schools were no longer accredited, as stated in HLC's November 2017 letter. On May 3, 2018, the Department sent letters to IIA and AIC informing them that, because the schools were merely candidates for accreditation, they were not eligible to participate in Title IV and had not been eligible since January 20, 2018. Id. ¶¶ 47-50; see Compl. Exs. A & B. To avoid a lapse of eligibility, however, the Department retroactively placed the schools on a “temporary interim nonprofit status.” Compl. Exs. A & B. In June 2018, the schools and the Dream Center informed the students about the loss of accreditation. Compl. ¶¶ 65-66. Most of the Plaintiffs soon withdrew from the schools, and both schools closed by the end of 2018. Id. ¶¶ 10-13, 80.

In October 2019, Plaintiffs brought this lawsuit against the Department, alleging that its “decisions allowing IIA and AIC to participate in Title IV, and students to take out loans to attend those schools” violated the Administrative Procedure Act (“APA”). Id. ¶ 5. On October 30, 2019, a week after Plaintiffs had filed suit but before they had served the complaint on the Department, the Secretary of Education approved the decision to cancel the loans taken out by IIA and AIC students between January 20, 2018 and December 2018, a decision which the Department announced about a week later via press release. Declaration of Principal Deputy Undersecretary Diane Jones (“Jones Decl.”) ¶¶ 11-12. After issuing the press release, the Department contacted Plaintiffs seeking a dismissal. Pet. for Attorneys' Fees at 11. Plaintiffs declined to dismiss the case, stating that, among other things, they wanted the Department to confirm that it would not issue former students IRS Form 1099s for the cancelled loan amounts,

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and that it would extend the closed-school discharge lookback period, notify potential class members about the expanded eligibility, and ensure that loan servicers were updated about cancelled loans. Id. After some negotiation, the parties reached an agreement to settle the case.

The parties filed a Stipulated Order of Dismissal (“Stipulated Order”) on March 27, 2020. The Stipulated Order detailed the actions the Department had already taken (such as cancelling the relevant loans and confirming that no 1099s would issue), as well as additional tasks that it would perform later, including emailing student borrowers about the loan cancellations and updating its webpage with a copy of the Stipulated Order and contact information for the Department's loan servicers. See Stipulated Order at 1-4. The stipulation concluded by asking the Court to sign the proposed order (1) staying the case for 60 days, after which the Department would be required to “file a report addressing each of the obligations listed above,” and (2) dismissing the case “[u]pon . . . Defendants' fulfillment of the obligations provided herein.” Id. at 4-5. In lieu of signing the Stipulated Order, the Court entered two Minute Orders. The first Order stayed the case for 60 days and ordered the Department “to file a report by May 29, 2020 addressing each of the obligations listed in the [12] Stipulated Order of Dismissal,” as the parties had requested. Minute Order, Mar. 30, 2020 (“March Minute Order”). On May 29, 2020, the Department filed a status report updating the Court on the completion of its obligations contained in the Stipulated Order. Defs.' Report Regarding Obligations Contained in Stipulation of Dismissal, ECF No. 15. The Department reported that it had completed the outstanding tasks in the Stipulated Order. Id. Accordingly, in the second Minute Order, the Court dismissed the case “[i]n light of Plaintiff's [12] Stipulation of Dismissal and the Government's [15] Status Report.” Minute Order, June 3, 2020 (“June Minute Order”); see Stipulated Order at 5.

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Plaintiffs petitioned for attorneys' fees and costs under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412, and the petition is ripe for the Court's consideration.

II. Analysis

A. Subject Matter Jurisdiction

Under the EAJA, “a court shall award to a prevailing party” fees and other expenses “incurred by that party in any civil litigation . . . brought by or against the United States in any court having jurisdiction of that action.” 28 U.S.C. § 2412(d)(1)(A) (emphasis added). Accordingly, to obtain fees under the EAJA, “there must be standing and otherwise proper subject matter jurisdiction for the underlying action.” Advanced Mgmt. Tech. v. FAA, 211 F.3d 633, 638 (D.C. Cir. 2000) (emphasis omitted). The Department contends that this Court lacked subject matter jurisdiction over Plaintiffs' underlying action because, according to the Department, “the key relief sought by Plaintiffs, and the only relief that would redress their claim of injury, is injunctive relief,” which is unavailable under the HEA. Opp. at 12; see 20 U.S.C. § 1082(a)(2) (stating that “no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Secretary or property under the Secretary's control”); Student Loan Mktg. Ass'n v. Riley, 907 F.Supp. 464, 474 (D.D.C. 1995).

The Court has subject matter jurisdiction. The Court begins by noting the incongruity of the Department's invocation of the Court's jurisdiction to endorse the parties' settlement agreement by signing the Stipulated Order and its current position that the Court lacked jurisdiction from the start. In any case, although the HEA's anti-injunction provision bars injunctive relief, such “anti-injunction clauses do not preclude consideration of requests for declaratory relief.” Id. (citing Thomas v. Bennett, 856 F.2d 1165, 1167 (8th Cir. 1988); and then citing Pro Schs., Inc. v. Riley, 824 F.Supp. 1314, 1315-16 (E.D. Wis. 1993))); accord Bank of America NT & SA v. Riley,

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940 F.Supp. 348, 351 (D.D.C. 1996) (“There is no indication in the HEA, and none has been cited from its legislative history, that Congress intended to eliminate all federal jurisdiction”-including jurisdiction to issue declaratory...