Jackson v. Culinary School of Washington, Ltd., 93-5083

• Decision Date: 25 July 1995
• Docket Number: No. 93-5083,93-5083
• Citation: 59 F.3d 254
• Parties: , 101 Ed. Law Rep. 599 Michael JACKSON, et al., Appellants, v. CULINARY SCHOOL OF WASHINGTON, LTD., et al., Appellees. District of Columbia Circuit
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 254

59 F.3d 254

313 U.S.App.D.C. 258, 101 Ed. Law Rep. 599

Michael JACKSON, et al., Appellants, v. CULINARY SCHOOL OF WASHINGTON, LTD., et al., Appellees.

No. 93-5083.

United States Court of Appeals,District of Columbia Circuit.

Decided July 25, 1995.

Appeal from the United States District Court for the District of Columbia (No. 91cv00782).

Michael E. Tankersley, argued the cause, for appellants. With him on the briefs were Brian Wolfman, Alan B. Morrison and Clare L. McCulla. Paul A. Fiscella entered an appearance.

Fred E. Haynes, Asst. U.S. Atty., argued the cause, for appellee Riley, Secretary of Educ. With him on the brief were Eric H. Holder, Jr., U.S. Atty., and John D. Bates and R. Craig Lawrence, Asst. U.S. Attys.

W. Scott Davis, argued the cause, for appellees Nebraska Student Loan Program, Inc., et al. With him on the brief was Douglas K. Spaulding.

On the brief, for appellee Great Lakes Higher Educ. Corp. was Ann U. Smith. Michael R. Hatcher entered an appearance.

On the brief, for appellee Crestar Bank were Mark B. Bierbower and Virginia W. Powell.

On the brief, for appellee Virginia State Educ. Asst. Authority was Richard C. Kast, Asst. Atty. Gen. for the State of Virginia.

Leslie H. Wiesenfelder entered an appearance, for appellee Ohio Student Loan Com'n.

Before WALD, SILBERMAN and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

This case is returned to us from the Supreme Court, which vacated and remanded our initial opinion in this case, Jackson v. Culinary School of Washington, 27 F.3d 573 (D.C.Cir.1994), and asked us to reconsider the issues presented in light of Wilton v. Seven Falls Co., --- U.S. ----, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). See Jackson v. Washington Culinary School, --- U.S. ----, 115 S.Ct. 2573, 132 L.Ed.2d 824 (1995).

I.

The facts of this case are laid out in detail in our original opinion. In brief, appellants are 59 students of the former Culinary School of Washington who seek declaratory and injunctive relief against the enforcement of their student loans because of alleged fraud and breach of contract by the school, which is now apparently judgment-proof. All parties are willing to assume that appellants have valid fraud and breach of contract claims against the school, but they dispute whether those claims have any effect on appellants' obligations to repay their loans to the third-party lenders, guaranty agencies, and the Secretary of Education. Appellants argue that the school's misconduct relieves them of their duty to repay the loans under both federal and District of Columbia law and seek declaratory and injunctive relief on this basis.

The district court ruled on the merits of all the claimed defenses and held that none afforded appellants relief. When the case originally came to us on appeal, we questioned the appropriateness of the district court's decision to render declaratory judgment on the state law claims because complex and speculative choice of law issues made it far from clear whether or to what degree District of Columbia law would, in fact, apply to the appellants' claims. Holding (erroneously as it turned out) that the district court's decision to grant declaratory judgment is reviewed de novo, we found only the single claimed defense arising from federal law suitable for declaratory resolution and held that it afforded appellants no relief. We found the remaining claimed defenses arising from state law inappropriate for declaratory relief.

In Wilton, the Supreme Court confirmed that a district court has discretion to deny declaratory relief but held that the district court's decision whether to grant declaratory judgment is reviewed for abuse of discretion rather than de novo. After carefully reviewing Wilton, we find that part of our initial decision addressing the merits of appellants' claimed federal defense unaffected and, accordingly, order part II.B. of the original decision reinstated. See Jackson, 27 F.3d at 582-86. As to the state law claims, we are unable to determine whether the district court's decision to grant declaratory relief on these claims was an abuse of discretion because the district court offered no explanation of its decision to proceed to the merits. Although the issue of the appropriateness of declaratory judgment was not raised by the parties below, the considerations counseling against declaratory judgment in this case, which we discussed at length in our original opinion, see Jackson, 27 F.3d at 580-82, and repeat in a briefer form below, are sufficiently grave that we find it prudent to remand the case so that the district court has the opportunity to exercise its discretion in accordance with the factors made relevant in Wilton, thereby providing a basis for appellate review under the appropriate standard.

II.

Appellants' claimed state law defenses are based on several District of Columbia consumer protection statutes and on a common law principle. They argue that (1) two provisions of the District of Columbia Consumer Credit Protection Act, Sec. 28-3807 and Sec. 28-3809, make their school-based defenses applicable to third-party lenders and their assignees, (2) the Federal Trade Commission ("FTC") holder rule--which requires sellers of goods or services who take or receive consumer credit contracts to include notice in the instruments that all consumer defenses will be preserved against subsequent holders of the loan--must be implied into their loan contracts under state common law principles, and (3) the school's failure to provide notice in accordance with the FTC holder rule violates another...