Lease v. Cardona

• Decision Date: 16 April 2021
• Docket Number: 2:20-cv-00106-JNP-JCB
• Parties: BRET R. LEASE, Plaintiff, v. MIGUEL A. CARDONA and UNITED STATES DEPARTMENT OF EDUCATION, Defendants.
• Court: U.S. District Court — District of Utah

BRET R. LEASE, Plaintiff, v. MIGUEL A. CARDONA and UNITED STATES DEPARTMENT OF EDUCATION, Defendants.

No. 2:20-cv-00106-JNP-JCB

United States District Court, D. Utah

April 16, 2021

Jill N. Parrish, District Judge

REPORT AND RECOMMENDATION

JARED C. BENNETT United States Magistrate Judge

District Judge Jill N. Parrish referred this case to Magistrate Judge Jared C. Bennett under 28 U.S.C. § 636(b)(1)(B).^[1] Before the court is Defendants Miguel A Cardona^[2] and the United States Department of Education's (“DOE”) (collectively, “DOE Defendants”) motion to dismiss.^[3] The court has carefully reviewed the written memoranda submitted by the parties. Under DUCivR 7-1(f), the court concludes that oral argument is not necessary and, therefore, decides the motion on the written memoranda. Based upon the analysis set forth below the court recommends granting the DOE Defendants' motion and dismissing this action.

BACKGROUND

Plaintiff Bret R. Lease (“Mr. Lease”), who is an attorney proceeding pro se, ^[4] has seventeen different federal student loans through the DOE. FedLoan Servicing (“FedLoan”) administers his loans. Mr. Lease entered the DOE's income-based repayment (“IBR”) program in early 2015, which reduced his aggregate monthly payment for all seventeen loans to $0.00. FedLoan removed Mr. Lease from the IBR program in early 2016 after he submitted insufficient documentation to verify his annual income. The accrued interest on his loans was then capitalized. Over the next few months, Mr. Lease received inconsistent explanations from FedLoan employees about his loan accounts. He was finally readmitted to the IBR program in July 2016. The accrued interest on his loans was again capitalized.

Believing the capitalizations and resulting interest calculations to be in error, Mr. Lease filed a state-court complaint against the DOE and several other defendants in March 2018 for breach of contract (“Prior Action”). The Prior Action was subsequently removed to this court. The DOE moved to dismiss the Prior Action, alleging that Mr. Lease's claims were moot and barred by sovereign immunity. Along with its motion the DOE submitted a declaration from a DOE employee indicating that the DOE had corrected any erroneous capitalizations and calculations on Mr. Lease's loan accounts. On June 7, 2019, District Judge Bruce S. Jenkins granted the DOE's motion and dismissed the Prior Action without prejudice on mootness grounds.^[5] Judge Jenkins concluded that because the DOE had corrected any errors in Mr. Lease's loan accounts, Mr. Lease had already received the only relief to which he could have been entitled and therefore, there was no live controversy to resolve.^[6]

Mr. Lease filed the instant action on February 19, 2020, alleging several claims under the Administrative Procedure Act (“APA”).^[7] Mr. Lease first claims that the DOE Defendants violated the APA by depriving him of his entitlement to interest subsidies on his subsidized and unsubsidized federal student loans. Second, he asserts that the DOE Defendants violated the APA by making arbitrary and capricious determinations about the application of interest subsidies to both his subsidized and unsubsidized loans. Third, Mr. Lease alleges an APA claim for violation of his due process rights, as well as the due process rights of all other borrowers enrolled in the IBR program, based upon the DOE Defendants' alleged denial of interest subsidy entitlements without a meaningful review process.

The DOE Defendants moved to dismiss this action under Fed.R.Civ.P. 12(b)(1) on January 29, 2021.^[8] The DOE Defendants argue that the court lacks subject matter jurisdiction over Mr. Lease's A P A claims. In response, Mr. Lease asserts that the court has subject matter jurisdiction and, therefore, his claims should be adjudicated.

LEGAL STANDARDS

I. Rule 12(b)(1)

Under Fed.R.Civ.P. 12(b)(1), this court should “presume no jurisdiction exists, ”^[9] and the burden of establishing subject matter jurisdiction “rests upon the party asserting jurisdiction.”^[10] To establish jurisdiction, a plaintiff “must allege in [his] pleading the facts essential to show jurisdiction, and must support [those facts] by competent proof.”^[11]

Generally, Rule 12(b)(1) motions to dismiss for lack of subject matter jurisdiction take two forms. First, a facial attack on the complaint's allegations as to subject matter jurisdiction questions the sufficiency of the complaint. In reviewing a facial attack on the complaint, a district court must accept the allegations in the complaint as true.

Second, a party may go beyond allegations contained in the complaint and challenge the facts upon which subject matter jurisdiction depends. When reviewing a factual attack on subject matter jurisdiction, a district court may not presume the truthfulness of the complaint's factual allegations. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). In such instances, a court's reference to evidence outside the pleadings does not convert the motion to a Rule 56 motion.^[12]

II. APA

The APA provides a limited waiver of sovereign immunity and allows a plaintiff who has “suffer[ed] legal wrong because of agency action” to file suit against a federal agency.^[13] Without a waiver, a court lacks subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) to hear a plaintiff's claim.^[14] The party seeking federal jurisdiction over his or her claim “has the burden to establish that it is proper, and there is a presumption against its existence.”^[15]

Under section 706(1) of t h e A P A, a plaintiff can sue a government agency for “agency action unlawfully withheld or unreasonably delayed.”^[16] Section 706(2)(A) of the A PA also allows a court to set aside final agency action that is “arbitrary” and “capricious.”^[17] Additionally, section 706(2)(B) of the A P A allows a court to set aside final agency action that is “contrary to constitutional right, power, privilege, or immunity.”^[18]

ANALYSIS

Based upon the following analysis: (I) all of Mr. Lease's claims in this case are barred by the doctrine of issue preclusion and, therefore, should be dismissed for lack of subject matter jurisdiction.^[19] As alternative grounds for dismissal, the court concludes that it lacks subject matter jurisdiction over: (II) Mr. Lease's section 706(1) claims related to his unsubsidized loans; (III) Mr. Lease's section 706(2)(A) claims; and (IV) Mr. Lease's section 706(2)(B) claims. Therefore, the court recommends granting the DOE Defendants' motion and dismissing this action without prejudice.^[20] The court addresses each of the foregoing issues in turn below.

I. Mr. Lease's Claims in This Case Are Barred by the Doctrine of Issue Preclusion.

All of Mr. Lease's claims in this case allege, in one way or another, that the DOE Defendants violated the APA by improperly applying interest subsidies to his loans. However, Judge Jenkins held in the Prior Action that the DOE rectified any errors in applying interest subsidies. Therefore, as shown below, the doctrine of issue preclusion bars Mr. Lease's claims here.

“[I]ssue preclusion bars a party from relitigating an issue once it has suffered an adverse determination on the issue, even if the issue arises when the party is pursuing or defending against a different claim.”^[21] Issue preclusion generally applies when:

(1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party, or in privity with a party, to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action.^[22]

With respect to the second factor, it is true that “jurisdictional dismissals are not on the merits.”^[23]However, “[i]t has long been acknowledged that [t]he principles of res judicata apply to questions of jurisdiction as well as to other issues.”^[24] “In particular, dismissals for lack of jurisdiction preclude relitigation of the issues determined in ruling on the jurisdiction question.”^[25]

Judge Jenkins's decision in the Prior Action satisfies the requirements of issue preclusion here. First, even though Mr. Lease is pursuing different claims in this case than he pursued in the Prior Action, the issue presented in both cases (i.e., mootness of his claims concerning the propriety of the DOE's application of interest subsidies to his loans) is identical. In both actions, Mr. Lease contends that the DOE erred in its application of interest subsidies to his seventeen student loans. However, Judge Jenkins held that any error had been rectified, which made the case moot. Thus, the issue regarding mootness is identical.

Second, although the Prior Action was not adjudicated on the merits, the foregoing principles make clear that issue preclusion applies to jurisdictional questions due to mootness. Judge Jenkins previously adjudicated the mootness issue on these very loans.

Third, Mr. Lease was a party to the Prior Action. He was the plaintiff, and the DOE was the defendant.

Finally, Mr. Lease had a full and fair opportunity to litigate the issue of mootness in the Prior Action. Both he and the DOE briefed the mootness issue, and Judge Jenkins dismissed the action as moot.

Because all of the elements of issue preclusion are satisfied, all of Mr. Lease's claims in this case are barred because they are predicated on the moot issue of whether the DOE erred in its interest application. Consequently, this action should be dismissed as moot.^[26]

II. The Court Lacks Subject Matter...