St. Mary of the Plains v. Higher Ed. Loan Program

Citation724 F. Supp. 803
Decision Date03 October 1989
Docket NumberNo. 89-1460-C.,89-1460-C.
PartiesST. MARY OF THE PLAINS COLLEGE, Plaintiff, v. HIGHER EDUCATION LOAN PROGRAM OF KANSAS, INC., Defendant.
CourtU.S. District Court — District of Kansas

Wayne Hartke, Hartke and Hartke, Falls Church, Va., Gary Ayers and Robert L. Heath, Foulston & Siefkin, Wichita, Kan., for plaintiff.

Robert F. Bennett, Patrick D. Gaston, and Patricia A. Bennett, Bennett, Lytle, Wetzler, Winn & Martin, Prairie Village, Kan., for defendant.

MEMORANDUM AND ORDER

CROW, District Judge.

The case comes before the court on the defendant's motion to dismiss. Plaintiff, St. Mary of the Plains College (St. Mary's), filed this action on August 22, 1989, seeking a declaratory judgment and injunctive relief concerning certain rights claimed by it under the Higher Education Act of 1965, as recently amended by the Higher Education Amendments of 1986, 20 U.S.C. §§ 1070 et seq. With its complaint, plaintiff also filed an application for a temporary restraining order, preliminary and permanent injunction. Upon notice to the defendant, the court heard plaintiff's application for a temporary restraining order (TRO) on August 25, 1989, at 9:30 a.m. Counsel for both parties appeared and presented arguments. The court granted plaintiff's application from the bench and entered the order that same day. This relief was then extended into a preliminary injunction upon an agreed order filed September 29, 1989.

In its complaint, plaintiff alleges the Secretary of Education has determined it to be an institution eligible for participation in various Title IV federal financial assistance programs including the federal Guaranteed Student Loan Program, now known as the Robert T. Stafford Student Loan Program (SSLP), 20 U.S.C. §§ 1071 et seq. St. Mary's has contracted with the American Truck Driving School (ATDS) to perform the correspondence portion (lesson materials) of a truck driving program while ATDS offers the residential portion or behind-the-wheel training. In the "Institutional Eligibility Notice" from the Department of Education dated August 4, 1988, St. Mary's was informed, inter alia, that its truck driving program in conjunction with ATDS was also eligible to apply to participate in the Title IV financial assistance programs including the guaranteed student loan program.

Defendant, Higher Education Loan Program of Kansas, Inc. (K-HELP), is a private corporation serving as the lender of last resort for Kansas under the SSLP, 20 U.S.C. § 1078(j), which provides:

In each State, the guaranty agency or an eligible lender in the State described in section 435(d)(1)(D) of this Act (20 USCS § 1085(d)(1)(D)) shall make loans directly, or through an agreement with an eligible lender or lenders, to students eligible to receive interest benefits paid on their behalf under subsection (a) of this section who are otherwise unable to obtain loans under this part (20 USCS §§ 1071 et seq.). Loans made under this subsection shall not exceed the amount of the need of the borrower, as determined under subsection (a)(2)(B), nor be less than $200. The guaranty agency shall consider the request of any eligible lender, as defined under section 435(d)(1)(A) of this Act (20 USCS § 1085(d)(1)(A)), to serve as the lender-of-last-resort pursuant to this subsection.

Plaintiff alleges K-HELP was violating this statutory duty in denying loan application of eligible students who were seeking to attend St. Mary's truck driving program and who were not residents of Kansas. Plaintiff also contends these actions of K-HELP essentially constituted an independent review and overruling of the Secretary's determination of St. Mary's eligibility. Plaintiff insists K-HELP had no statutory or regulatory authority for denying these loans. Plaintiff asserts this court has jurisdiction of this case pursuant to 28 U.S.C. § 1331, as it arises under and seeks enforcement of a federal statute, 20 U.S.C. §§ 1071 et seq.

K-HELP filed its motion to dismiss on the same day that the court heard plaintiff's application for a temporary restraining order. Defendant therein moved to dismiss the complaint and the application "on the grounds that Plaintiff lacks standing to assert the claim filed herein." (Dk. # 6). At the TRO hearing, defendant's counsel argued that the court lacked jurisdiction of the application and complaint on the same grounds set forth in the memorandum. The court cursorily reviewed defendant's motion before ruling from the bench on the plaintiff's application. The court applied the controlling law on standing and found it had jurisdiction over plaintiff's application, but the court expressly reserved its ruling on defendant's motion to dismiss the complaint pending receipt of plaintiff's memorandum in response. Having received and read plaintiff's response and defendant's supplemental memorandum and having conducted its own research, the court is ready to decide the motion to dismiss.

The law cited and arguments made in its motion do not concern the issue of standing, contrary to defendant's conclusion. Standing is a jurisdictional requirement having both constitutional and prudential dimensions. Standing is an element of the Article III limit on federal courts to resolve only "cases" and "controversies." Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 471-476, 102 S.Ct. 752, 757-61, 70 L.Ed.2d 700 (1982). Even where Article III principles of standing may be met, the Supreme Court has applied an additional set of prudential considerations which bear on the issue of standing. Id. at 474-475, 102 S.Ct. at 759-60. The relevant principles governing a challenge to standing were discussed and applied by this court during its bench ruling.

None of these standing principles or the germane case law are found in defendant's motion or memoranda. Instead of a motion to dismiss for lack of jurisdiction on the ground of standing, defendant is actually moving to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) for the lack of an express or implied cause of action under the asserted federal statute. The issue of whether a cause of action exists is not one of jurisdiction. Burks v. Lasker, 441 U.S. 471, 476 n. 5, 99 S.Ct. 1831, 1836 n. 5, 60 L.Ed.2d 404 (1979). However, if there is no cause of action, then obviously the court also would have no jurisdiction of the case as pled by the plaintiff. When the federal statute serves as both the basis for the court's subject matter jurisdiction and the plaintiff's substantive claim, the motion to dismiss for lack of jurisdiction should not be granted unless the claim is immaterial, insubstantial, or frivolous. Clark v. Tarrant County, Texas, 798 F.2d 736, 741-742 (5th Cir.1986). See also Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946); Black v. Payne, 591 F.2d 83, 86 n. 1 (9th Cir.), cert. denied, 444 U.S. 867, 100 S.Ct. 139, 62 L.Ed.2d 90 (1979). Where defendant's motion challenges both jurisdiction and the existence of a federal cause of action, the court should find jurisdiction and determine the merits of the claim pursuant to Rule 12(b)(6). Chiles v. Crooks, 708 F.Supp. 127, 129 (D.S.C.1989). See also Wheeler v. Hurdman, 825 F.2d 257, 259 (10th Cir.), cert. denied, 484 U.S. 986, 108 S.Ct. 503, 98 L.Ed.2d 501 (1987). Since plaintiff's claim is not insubstantial or frivolous, the court will treat the defendant's motion as going to the merits of whether a private cause of action exists under the SSLP.

Merely because a federal statute has been violated and some person or entity harmed does not necessarily mean a private cause of action exists in favor of those harmed. Cannon v. University of Chicago, 441 U.S. 677, 688, 99 S.Ct. 1946, 1952-53, 60 L.Ed.2d 560 (1979). The focal point in determining whether to infer a private cause of action from a federal statute is Congress' intent at the time of enacting the statute. Thompson v. Thompson, 484 U.S. 174, 177-79, 108 S.Ct. 513, 515-16, 98 L.Ed.2d. 512, 519 (1988). Congress' intent is discerned with the aid of statutory construction and the four factors identified in Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2087-88, 45 L.Ed.2d 26 (1975). Thompson, 484 U.S. at 177-80, 108 S.Ct. at 515-17, 98 L.Ed.2d. at 519-20. The four factors identified in Cort include:

First, is the plaintiff one of the class for whose especial benefit the statute was enacted — that is, does the statute create a federal right in favor of plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Cort, 422 U.S. at 78, 95 S.Ct. at 2088 (internal quotations and citations omitted) (emphasis in original). These four factors are not of equal weight, as the second and third factors are traditionally relied upon in deciding whether to infer a private cause of action. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 145, 105 S.Ct. 3085, 3091-92, 87 L.Ed.2d 96 (1985); Transamerica Mortgage Advisors v. Lewis, 444 U.S. 11, 23-24, 100 S.Ct. 242, 249, 62 L.Ed.2d 146 (1979); Touche-Ross & Co. v. Redington, 442 U.S. 560, 575-76, 99 S.Ct. 2479, 2488-89, 61 L.Ed.2d 82 (1979) ("language and focus of the statute, its legislative history, and its purpose"). Since Cort the Supreme Court has repeatedly stated that the critical inquiry is the intent of Congress. Merrill Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353, 377-78, 102 S.Ct. 1825, 1838-39, 72 L.Ed.2d 182 (1982) (and cases cited therein). The ultimate question for a court is not whether it believes a private cause of action would improve or build upon a statutory...

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