Nat'l Educ. Ass'n v. DeVos

• Decision Date: 17 December 2018
• Docket Number: Case No. 18-cv-05173-LB
• Citation: 345 F.Supp.3d 1127
• Parties: NATIONAL EDUCATION ASSOCIATION, et al., Plaintiffs, v. Betsy DEVOS, et al., Defendants.
• Court: U.S. District Court — Northern District of California

345 F.Supp.3d 1127

NATIONAL EDUCATION ASSOCIATION, et al., Plaintiffs,

v.Betsy DEVOS, et al., Defendants.

Case No. 18-cv-05173-LB

United States District Court, N.D. California, San Francisco Division.

Signed December 17, 2018

Eric Allen Harrington, Martha Fulford, Martha Fulford, Daniel Aaron Zibel, Pro Hac Vice, Martha Fulford, Pro Hac Vice, National Student Legal Defense Network, Washington, DC, Brian Joseph Schmidt, Laura Pauline Juran, California Teachers Association, Burlingame, CA, for Plaintiffs.

Stuart Justin Robinson, U.S. Department of Justice, San Francisco, CA, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

Re: ECF No. 23

LAUREL BEELER, United States Magistrate Judge

INTRODUCTION

Title IV of the Higher Education Act of 1965, as amended, authorizes the Secretary of Education and the Department of Education (collectively, the "Department") to provide grants and establish financial-assistance programs to help students pay for post-secondary education. Educational institutions must meet certain requirements to participate in these financial-assistance programs.

In December 2016, the Department promulgated regulations adding new requirements for institutions that offer distance-education or correspondence-course programs. Program Integrity and Improvement , 81 Fed. Reg. 92,232 (Dec. 19, 2016). Section 668.50 of the regulations (the "Disclosure Rule") required the institutions to issue certain disclosures, both publicly and individually, to their enrolled and prospective students (collectively, the "Disclosures"). Among other things, the Disclosure Rule required the educational institutions to disclose (1) any adverse actions that a state entity or an accrediting agency might have initiated against them and (2) whether their educational programs that prepare students for jobs in fact satisfy the educational requirements for state licensing or certification for those jobs (e.g., whether a program that prepares students to become teachers satisfies the educational requirements for its students to get teaching certificates). Id. at 92,262 –63.

The Disclosure Rule was set to go into effect on July 1, 2018. Following a change in presidential administrations, however, the Department issued a new rule in the summer of 2018 (the "Delay Rule"), delaying the effective date of the Disclosure Rule from July 1, 2018 to July 1, 2020 and raising the prospect that it would revise and reconsider the Disclosure Rule entirely. Program Integrity and Improvement , 83 Fed. Reg. 31,296, 31,296 (July 3, 2018).

The National Education Association (the "NEA"), the California Teachers Association (the "CTA"), and Shane Heiman, Kwynn Uyehara, and Stephanie Portilla (the "Individual Plaintiffs") — NEA and CTA members who are enrolled or considering enrolling in online-education programs — filed this action against the Department. The plaintiffs allege that the Department failed to comply with certain statutory requirements in promulgating the Delay Rule and that the Delay Rule thus is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" in violation of the Administrative Procedure Act (the "APA").

The Department moves to dismiss the plaintiffs' complaint under Federal Rule of Civil Procedure 12(b)(1) on the ground that the plaintiffs do not have Article III standing. The Department argues that the plaintiffs (1) have not suffered an injury in fact (2) that is fairly traceable to the Department (3) that is redressable. The Department argues that the loss of the Disclosures does not constitute an injury in fact caused by the Department. The Department also argues that any purported harm to the plaintiffs is speculative and conjectural. The plaintiffs respond that they are being deprived of information that they would have received in the Disclosures and that they would use that information to make decisions about whether to continue to spend their time and money in continuing in their online-education programs. The plaintiffs argue that the loss of this information is an injury in fact and that this injury is fairly traceable to the Department's actions in issuing the Delay Rule.

The court denies the Department's motion to dismiss. The plaintiffs have pleaded standing.

STATEMENT

1. The Higher Education Act's "State Authorization" Requirement

Congress enacted the Higher Education Act (the "HEA") "[t]o strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education." Higher Education Act of 1965, Pub. L. No. 89-329, 79 Stat. 1219, 1219 (1965). Title IV of the HEA "assist[s] in making available the benefits of postsecondary education to eligible students ... in institutions of higher education" through federal grants and financial-assistance programs. 20 U.S.C. § 1070.

The HEA imposes certain requirements on educational institutions to be eligible for students to pay for their programs with Title IV grants and loans. 20 U.S.C. § 1094(a) ("In order to be an eligible institution for the purposes of any program authorized under this subchapter, an institution must be an institution of higher education or an eligible institution (as that term is defined for the purpose of that program)[.]"). In order for an institution within the United States to be eligible, it must be "an educational institution in any State that ... is legally authorized within such State to provide a program of education beyond secondary education[.]" 20 U.S.C. § 1001(a)(2) ; see 20 U.S.C. § 1094(i)(4) (citing 20 U.S.C. § 1002(a)(1), (b)(1)(B), (c)(1)(B) (citing 20 U.S.C. § 1001 ) ).

The HEA does not further define what it means for an educational institution to be "legally authorized within such State."

2. The 2016 Disclosure Rule

During the last presidential administration, concerns were raised regarding fraud and noncompliance among online and distance-education programs. As the Department reported, "[t]he Office of the Inspector General (OIG), the Government Accountability Office (GAO), and others have voiced concerns over fraudulent practices, issues of noncompliance with requirements of the title IV programs, and other challenges within the distance education environment." 81 Fed. Reg. at 92,232. "Such practices and challenges include misuse of title IV funds, verification of student identity, and gaps in consumer protections for students." Id.

The Department observed that Title IV's state-authorization requirement envisions that "States, accrediting agencies, and the Department act jointly as gatekeepers for the Federal student aid programs[.]" 81 Fed. Reg. at 92,232. The Department noted that "[b]ecause institutions that offer distance education programs usually offer the programs in multiple States, there are unique challenges with respect to oversight of these programs by States and other agencies." Id. "Many States and stakeholders have expressed concerns with these unique challenges, especially those related to ensuring adequate consumer protections for students as well as compliance by institutions participating in this sector." Id. "For example, some States have expressed concerns over their ability to identify which out of State providers are operating in their States; whether those programs prepare their students for employment, including meeting licensure or certification requirements in those States; the academic quality of programs offered by those providers; as well as the ability to receive, investigate and address student complaints about out-of-State institutions." Id.

To address these issues, the Department engaged in a multi-year rulemaking process that cumulated in its promulgating new regulations in December 2016.¹ The regulations required educational institutions offering distance-education or correspondence-course programs to students residing in a state where the institution is not physically located to meet that state's requirements for distance-education or correspondence-course programs (or be covered by a state reciprocity agreement) in order to be "legally authorized within such State."² The regulations also included a new Disclosure Rule, which "[r]equire[d] that an institution provide public and individualized disclosures to enrolled and prospective students regarding its programs offered solely through distance education or correspondence courses." See 81 Fed. Reg. at 92,233. Among other things, the Disclosure Rule "requir[ed] disclosures that reflect actions taken against a distance education program, how to lodge complaints against a program [students] believe has misled them, and whether the program will lead to certification or licensure[.]" See id. at 92,232 –33. The Department explained that these requirements "will protect students by providing them with important information that will aid their decisions regarding whether to enroll in distance education programs or correspondence courses as well as improve the efficacy of State-based consumer protections for students." Id. at 92,232.

Specifically, the Disclosure Rule imposed the following requirements:

(a) General. In addition to the other institutional disclosure requirements established in this and other subparts, an institution described under 34 CFR 600.9(a)(1) or (b) that offers an educational program that is provided, or can be completed solely through distance education or correspondence courses, excluding internships and practicums, must provide the information described in paragraphs (b) and (c) of this section to enrolled and prospective students in that program.

(b) Public disclosures. An institution described under 34 CFR 600.9(a)(1) that offers an educational program that is provided, or can be completed solely through distance education or correspondence courses, excluding internships and practicums, must make available the following information to enrolled and prospective students of such program, the form and content of which the Secretary

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