DISTRICT OF MASSACHUSETTS DARNELL E. WILLIAMS and … · 2019-12-15 · Plaintiffs Darnell E....

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

DARNELL E. WILLIAMS and YESSENIA M. TAVERAS, Plaintiffs, v. ELIZABETH DEVOS in her official capacity as Secretary of the United States Department of Education, Defendant.

Civil Action No. 16-11949-LTS

PLAINTIFFS’ MEMORANDUM RESPONSE TO COMMONWEALTH’S MOTION

TO COMPEL COMPLIANCE WITH THIS COURT’S ORDER OR TO INTERVENE

Plaintiffs Darnell E. Williams and Yessenia M. Taveras submit this memorandum in

response to the motion (“Motion”) by the Commonwealth of Massachusetts (the

“Commonwealth”) to compel compliance with the Court’s Order in this matter, Dkt. No. 99

(the “Order”), pursuant to Federal Rule of Civil Procedure 71, or to intervene pursuant to

Federal Rule of Civil Procedure 24 in this action.

The Commonwealth seeks full compliance with the Order on behalf of all people

covered by the defense to repayment application submitted by Attorney General Healey to the

Secretary of Education (the “Secretary”) in November 2015. This defense to repayment

application (“DTR”) provided evidence to establish widespread fraud committed by Corinthian

College, Inc. (“Corinthian”) against Massachusetts students, including 7,200 students

identified in Exhibit 4 of the DTR (“Exhibit 4”). Dkt. No. 47-1. Defendant, the Secretary,

disputed that the DTR was sufficient to invoke a borrower defense to repayment on behalf of

Case 1:16-cv-11949-LTS Document 123 Filed 03/27/19 of 15

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Plaintiffs merely because they were listed in Exhibit 4. In its Order, the Court rejected this

contention, stating clearly and unambiguously that “the DTR invoked a borrower defense

proceeding on behalf of the people listed on Exhibit 4.” Dkt. No. 99 at 29. The DTR “invoked

the administrative remedy of Education’s review process such that Education was required to

adjudicate the request[.]” Id. at 20.

As is now clear, the Secretary continues to maintain that the DTR did not invoke a

borrower defense on behalf of the individuals named in Exhibit 4, Dkt. No. 116-4, does not

intend to adjudicate the request, Dkt. No. 108 at 2, and continues to certify individuals listed in

Exhibit 4 for offset without considering the evidence in the DTR. Furthermore, the Secretary

continues a general practice of maintaining certifications of students’ debts while their

borrower defense applications are pending, contrary to the Secretary’s representations in her

December status report. See Dkt. No. 101 ¶ 6. Plaintiffs support the Commonwealth’s Motion,

because the Secretary should be compelled to fully comply with this Court’s Order.

BACKGROUND

As documented by the Commonwealth, Corinthian committed massive fraud against

students in Massachusetts. Such fraud formed the basis of a lawsuit filed by the

Commonwealth against Corinthian in Massachusetts Superior Court in 2014, Dkt. No. 47-1 at

2, which led to a final judgment in 2016 ordering restitution of all funds Corinthian acquired

from graduates who enrolled between July 1, 2006 through June 30, 2014, Dkt. No. 29-1

Attach. 1 at 5. In November 2015, Attorney General Healey sent the DTR to the Secretary

requesting loan discharges for defrauded Massachusetts borrowers. Dkt. No. 47-1. The DTR

included thousands of pages of evidence regarding the unfair and deceptive acts of Corinthian


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that violated Massachusetts law and individually identified, in Exhibit 4 of the DTR, about

7,200 students affected by such practices. See id.

Plaintiffs Williams and Taveras were two of the thousands of defrauded students listed

in Exhibit 4. Dkt. No. 29-1 at 12. After having received the DTR from Attorney General

Healey in November 2015, the Secretary certified Plaintiffs’ student loan debts as legally

enforceable for purposes of referral to the U.S. Department of the Treasury’s Treasury Offset

Program (“TOP”) in December 2015 and seized Plaintiffs’ tax refunds in April and May 2016.

AR at 488–89, 521–23, 793–94, 818–19. The Secretary failed to consider the DTR before

certifying Plaintiffs’ loans. Dkt. No. 55 ¶¶ 11–14.

Plaintiffs brought this lawsuit on September 28, 2016, alleging that the Secretary’s

certification was improper. The Secretary moved to dismiss Plaintiffs’ action, Dkt. Nos. 18,

19, and Plaintiffs opposed, Dkt. No. 22. Upon the Secretary’s motion to dismiss, the

Commonwealth moved for leave to file an amicus curiae brief in support of Plaintiffs’

opposition, Dkt. No. 27, and the Court granted the motion, Dkt. No. 28. After considering the

Secretary’s motion to dismiss as well as Plaintiffs’ opposition and the Commonwealth’s brief,

the Court allowed the motion to dismiss to the extent Plaintiffs sought injunctive relief for

persons other than themselves. Dkt. No. 35. The Court otherwise denied the Motion. Id. The

dismissal was rendered “in light of the presumption that the defendant, a public official, will

act in good faith and comply with governing law as declared by the Court.” Id.

After hearing Plaintiffs’ and Defendant’s cross-motions for judgment, the Court

concluded that the DTR had invoked a valid borrower defense proceeding on behalf of each

borrower listed in Exhibit 4 and provided specific instructions to the Secretary to report on its

status and timing in rendering decisions with respect to Plaintiffs’ pending borrower defenses.


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Dkt. No. 99 at 29–30. The Court retained jurisdiction to review any challenges to the actions

required by the Order.

Defendant filed a status report on December 20, 2018. Dkt. No. 101. The status report

did not provide a timeline or any other information regarding the “redetermination of [the

Secretary’s] certification decision, including consideration of the borrower defense asserted by

Attorney General Healey’s letter,” as required by the Order. Dkt. No. 101; Dkt. No. 99 at 30.

Defendant reported that, as of December 10, 2018, “each account referred to TOP is checked

weekly to verify whether a borrower defense application has been filed. If such application has

been filed, the account will be removed from TOP and put into forbearance or stopped

collection status.” Dkt. No. 101 at 2.

On February 6, 2019, following a status conference, the Court ordered Defendant to

“render a decision on the merits of the plaintiffs’ applications for borrower defense, including

the claims asserted by Attorney General Healey’s letter . . . by March 18, 2019[.]” Dkt. No.

108. This order was stayed until May 28, 2019, Dkt. No. 113, upon the submission by

Plaintiffs and Defendant of a joint notice of settlement in principle, Dkt. No. 112.

The Commonwealth thereafter moved to enforce or intervene to protect the interests of

the approximately 7,200 other defrauded borrowers listed in Exhibit 4. Dkt. No. 115. As stated

in that Motion, counsel for the Commonwealth has sought to have the Secretary fully comply

with the Court’s Order and consider the DTR as invoking a valid borrower defense proceeding

on behalf of all student borrowers identified in Exhibit 4, Dkt. No., 115, and has repeatedly

requested confirmation from the Secretary of her intent to comply, Dkt. No. 116.

Counsel for the Commonwealth first wrote to the Secretary seeking confirmation that

she planned to cease involuntary collections against all borrowers identified in Exhibit 4 on


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November 28, 2018. Dkt. No. 116-1. In her December 12, 2018 response, counsel for the

Secretary failed to answer this question. Dkt. No. 116-2. The Secretary’s subsequent

December 20 status report did not confirm one way or another whether the Secretary considers

the DTR a borrower defense application for the purposes of removing accounts from TOP

certification, Dkt. No. 101.

Only in late February 2019 did counsel for the Commonwealth receive confirmation

that the Secretary is not considering the DTR as a valid borrower defense application for

individuals other than Plaintiffs. In response to a letter summarizing a verbal exchange, Dkt.

No. 116-3, counsel for the Secretary stated that “the Secretary does not interpret the Court’s

October 24, 2018 Order (ECF No. 99) in the above-captioned action as requiring her to take

any action with respect to any individuals other than the two named Plaintiffs in this matter.”

Dkt. No. 116-4 (emphasis added).

This confirmation occurred after the February 5, 2019 status conference. Counsel for

Plaintiff was not party to the verbal exchange, nor were they copied on correspondence from

Defendant’s counsel. Thus, counsel for Plaintiff was not aware of and did not raise this issue

with the Court during the status conference. Neither counsel for Defendant, nor in-house

counsel for the Department of Education, who appeared by phone, Dkt. No. 108 at 2, alerted

the Court to their interpretation of the Order.

In addition to the above information, since the status conference, Plaintiffs and their

counsel have become aware that the Secretary continues to certify for offset the student loan

debt of individuals listed in Exhibit 4 of the DTR, and has seized tax refunds from such

individuals. See Exs. A, B. Furthermore, the Secretary does not appear to be decertifying the


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accounts of individuals for TOP once they have submitted a borrower defense, see Ex. C,

contrary to the representation made in the status report, Dkt. No. 101 ¶ 6.

ARGUMENT

Plaintiffs agree with the arguments and points of law put forth by the Commonwealth

in support of its Motion. Plaintiffs submit this response to offer additional authority in support

of such Motion and to provide the Court further information relating to the necessity of

compelling compliance with the Order. As discussed below, the Court has authority to compel

compliance with respect to all borrowers covered by the DTR, not just the two Plaintiffs. The

Court’s Order concerns all borrowers listed in Exhibit 4. The Commonwealth has a valid and

lawful interest in enforcing the Order. The Commonwealth is entitled to intervene as a matter

of right because its interest in the action cannot be represented adequately by the named

Plaintiffs. See Fed. R. Civ. P. 24(a)(2). Defendant, a public official, is ignoring the Court’s

Order and attempting to manipulate this Court’s jurisdiction in order to evade compliance with

the Order. See Dkt. No. 108 at 2 (“[C]ounsel further informed the Court the Secretary might

exercise her discretion to discharge the plaintiffs’ debts without considering the merits of the

applications for borrower defense, provided that such a discharge would moot this case.”). For

the following reasons, the Commonwealth’s Motion should be granted.

I. DEFENDANT IS NOT COMPLYING WITH THE COURT’S ORDER.

This Court unambiguously found that the DTR invoked a valid borrower defense

proceeding on behalf of all individually-identified borrowers listed in Exhibit 4. Dkt. No. 99 at

29. However, despite the Order’s clear language, the Secretary maintains that she has the

unfettered right to, and is in fact continuing to, certify individuals with pending DTR

applications, including those listed in Exhibit 4, for involuntary collection.


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A. Despite the Order’s clear and unambiguous language, individuals with pending DTR applications continue to be certified for TOP.

Plaintiffs and their counsel are aware that the Secretary has certified (or failed to

decertify), and seized tax refunds from, individuals named in the DTR as well as other

individuals who have pending borrower defense applications. For example, one student

identified in Exhibit 4 of the DTR is a 2014 graduate of a Corinthian College Dental Assisting

Program. This individual received a notice of Proposed TOP dated July 16, 2018. Ex. A. The

Secretary represented in her December status report that “[e]ffective December 10, 2018, each

account referred to TOP is checked weekly to verify whether a borrower defense application

has been filed” and is removed from TOP “[i]f such application has been filed.” Dkt. No. 101

at 2. Notwithstanding this representation, on February 22, 2019, this former student had

$5,540.00 of her tax refund seized and applied to her Corinthian student loan debt. Ex. B.

Compliance with this Court’s Order would have required decertification of this former

student’s debt and removal of her account from TOP prior to the seizure of her refund, because

the Attorney General submitted a DTR application on her behalf, and that application had not

been adjudicated at the time of certification (or offset).

A second student who attended ITT Tech and is not covered by the DTR received

notice of Proposed TOP. In response, with assistance of undersigned counsel, he submitted a

timely objection based on borrower defense. On February 8, 2019, he was informed by the

Department that his “discharge request has been forwarded to the Department’s Borrower

Defense Unit for review.” Ex. C. No decision on the merits of his borrower defense has been

made. Nevertheless, the Department found his debt legally enforceable and requested the U.S


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Department of Treasury to offset his federal and/or state tax refunds and other payments in

service of the debt. Ex. C. This example belies Defendant’s adherence to the procedure

identified in the status report, and indicates that Defendant is not complying in good faith with

the Order.

These two examples demonstrate that the Secretary appears to be failing to decertify

individuals named in the DTR as well as other students who have properly invoked individual

borrower defense proceedings.

B. Plaintiffs’ circumstances are not distinguishable from the other 7,200 Students listed in Exhibit 4 and the Court’s Order establishes governing law with which the Secretary must comply. Early in the proceedings, the Secretary moved to dismiss the complaint for lack of

subject-matter jurisdiction. Dkt. No. 18. The Court granted the Secretary’s motion to dismiss

to the extent that (1) injunctive relief was sought (2) on behalf of persons other than named

Plaintiffs only because “of the presumption that the defendant, a public official, will act in

good faith and comply with governing law as declared by the Court.” Dkt. No. 35. The Court

otherwise denied the motion. This order specifically invoked the presumption of the

Secretary’s “good faith and compl[iance]” with regards to the “first portion” of the ruling—the

allowance of the motion to dismiss—because the Court assumed that the Secretary, as a public

official, would comply with any general statements of law provided by the Court’s orders,

even when such statements of law affected borrowers who were not named Plaintiffs. The

Secretary’s continued certification for tax offsets of student loan debts for individual

borrowers identified in the DTR rebuts such presumption of good faith and compliance.

Here, compliance with governing law requires the Secretary to act with consistency

with regards to the effect of the DTR application. This Court classified the DTR as a valid


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invocation of a borrower defense proceeding. Dkt. No. 99 at 29. The Court determined that the

DTR application was within Attorney General Healey’s authority to make on behalf of the

over 7,200 identified borrowers listed in Exhibit 4. The Attorney General is a lawyer able to

act on behalf of Massachusetts residents and represent such residents in administrative

proceedings. Dkt. No. 99 at 21–23. Furthermore, the Court rejected the Secretary’s assertion

that an individual signed statement was required from each identified student for the DTR to

invoke a borrower defense proceeding on behalf of identified students. Id. at 24. Thus,

Attorney General Healey had the authority to represent, in submitting the DTR, the over 7,200

identified borrowers listed in Exhibit 4.

Such a statement of governing law is not in conflict with the Court’s dismissal of the

complaint to the extent that it sought relief for persons other than the Plaintiffs. Statements of

law in court orders are distinguishable from specific relief accorded to an individual party.

Courts can make and enforce favorable statements of law without having explicitly ordered

injunctive relief for persons other than named Plaintiffs. See Berger v. Heckler, 771 F.2d 1556,

1565 (2d. Cir. 1985) (court can enforce a consent decree providing for a particular construction

of a statute that benefits “innumerable” unnamed parties); Cf. Hewitt v. Helms, 482 U.S. 755,

761 (1987) (distinguishing between favorable judicial statements of law and relief accorded to

individual plaintiff on merits of claim). A court may assume that a statement of law or specific

construction of a statute, once applied to a given party, should be equally applied to similarly

situated parties, barring an explicit change in law or agency interpretation.

Further, there is nothing that would or could distinguish the Court’s ruling on behalf of

Plaintiffs Williams and Taveras from Defendant’s legal obligations with respect to TOP

certification of any individual listed on Exhibit 4. The DTR was sufficient to exhaust


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administrative remedies, Dkt. No. 99 at 22, and Williams has submitted no additional

information to the Secretary beyond that supplied by the Attorney General in the DTR. The

Order holds that this is sufficient to invoke a borrower defense proceeding, and further that

neither Massachusetts law nor Defendant’s regulations require any additional or individualized

showing. Dkt. No. 99 at 27. Because the Court classified the DTR as a valid invocation of a

borrower defense proceeding, the Secretary must ensure that each individual listed in Exhibit 4

does not have an account certified for collection through TOP. Likewise, the DTR “invoked

the administrative remedy of Education’s review process such that Education was required to

adjudicate the request,” Dkt. No. 99 at 29, for each and every individual listed on Exhibit 4.

Given the number of Massachusetts residents, including those listed in Exhibit 4 of the

DTR, that were victims of striking violations of Massachusetts state law, Attorney General

Healey is not capable of proceeding on an individual-by-individual basis to resolve this matter

of clear public interest. Nor is there sufficient private representation available to protect the

rights of former Corinthian students, who may not have available resources to navigate

complicated legal and administrative systems. It is precisely for these reasons that the Attorney

General undertook the submission of the DTR in conjunction with the filing of a lawsuit

against Corinthian in the Massachusetts courts. Accord Dkt. No. 99 at 24 (“[The Court] rejects

the Secretary’s assertion that Attorney General Healey needed a signed statement (or its

equivalent) from each individual borrower before the DTR could invoke borrower defense

proceedings on each identified student’s behalf.”). Defendant should not be permitted to

ignore the Attorney General’s DTR in violation of this Court’s clear and unambiguous Order.

II. THE COURT HAS INHERENT AND GENERAL AUTHORITY TO ENFORCE ITS DETERMINATION THAT THE DTR INVOKES BORROWER DEFENSE.


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Courts generally have enforcement authority against parties that fail to comply with

clear and unambiguous court orders. See, e.g., Shillitani v. United States, 384 U.S. 364, 370

(1966). At the most extreme, such authority extends to the ability to hold parties or non-

parties, even public agencies, in civil contempt. See, e.g., Fortin v. Commissioner of

Massachusetts Dept. of Public Welfare, 692 F.2d 790, 797 (1st Cir. 1982) (holding state

agency in civil contempt and imposing fine for failure to comply with consent decree); see

generally Am. Rivers v. U.S. Army Corps of Engineers, 274 F. Supp. 2d 62, 69–70 (D.D.C.

2003) (holding Corps and Secretary of the Army in civil contempt injunctive order violation

and collecting cases supporting judicial authority to hold federal agencies in civil contempt

and impose coercive fines). Such authority does not necessarily end after judgment or when a

case has closed, and extends to enforcement of orders for non-party beneficiaries under

Federal Rule of Civil Procedure 71. See, e.g., Berger v. Heckler, 771 F.2d 1556, 1565 (2d Cir.

1985).

Here, this Court’s Order unambiguously stated that the DTR invoked a borrower

defense proceeding on behalf of all borrowers individually identified in Exhibit 4. Dkt. No. 99

at 29. The Order further elaborated that Attorney General Healey was authorized to submit the

DTR on behalf of Massachusetts residents as part of her general authority to act as a public

lawyer representing residents of the Commonwealth. See Dkt. No. 99 at 22–23. The Secretary

was required to consider the DTR to determine the validity of the Plaintiffs’ borrower defense

prior to the certification of their debts for offset. Dkt. No. 99 at 24, 29. Such clear statements

benefited not only Plaintiffs but all other 7,200 student borrowers identified in Exhibit 4 of the

DTR. As noted by the Commonwealth, in similar circumstances, federal officials have been

subject to the contempt power of the courts when such officials have failed to comply with


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consent decrees. See Berger 771 F.2d at 1565. In Berger, unnamed plaintiffs were permitted to

seek to hold the Secretary of Health and Human Services in contempt under Rule 71 when the

Secretary did not comply with a consent decree that had provided a particular construction of

the Supplemental Security Income (SSI) eligibility provision that benefited the unnamed

applicants not involved in the original suit. Id. Similarly, here the Order determined the DTR

validly invoked a borrower defense such that all those individually identified in Exhibit 4 are

benefited by the Court’s Order. Dkt. No. 99 at 20, 29. Like in Berger, this Court has general

authority to enforce an unambiguous Order that benefited unnamed individuals identically

situated to the Plaintiffs, and defined the legal rights of the Commonwealth to advance the

rights of those individuals, by and through the Office of the Attorney General.

III. ALLOWING INTERVENTION WOULD CAUSE NO PREJUDICE TO PLAINTIFFS.

Additionally, the Court should allow the Commonwealth’s Motion to intervene as a

party. The Motion is a timely response to the revelations that first, the Secretary is failing to

implement the Court’s Order, and second, that Plaintiffs have indicated an intention to settle

their individual claims, and thus may no longer adequately represent the Commonwealth’s

interest. See Fed. R. Civ. P. 24(a)(2).

Plaintiffs will not be prejudiced by the participation of the Commonwealth in this

litigation. Indeed, intervention by the Commonwealth will vindicate Plaintiffs’ interests.

As a general matter, Plaintiffs, as residents of Massachusetts, benefit when the power

and authority of the Attorney General to enforce consumer protection laws is recognized.

Likewise, they benefit when public officials comply with lawful court orders and statements of

governing law.


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In this specific instance, the Plaintiffs have an interest in seeing that Defendant

recognizes the DTR as a bar to the involuntary collection of the loans of individuals listed on

Exhibit 4, and follows her obligation to decide the merits of the DTR. As stated in the

Complaint, Corinthian targeted vulnerable and economically desperate individuals in “an

unrelenting scheme to secure unaffordable federal loans from vulnerable students, without

providing the education, services, or opportunities promised.” Dkt. No. 5 at 9 (citing Attorney

General Healey’s letter to Department). It left them worse off than before. Plaintiffs are no

exception. See Aff. Yessenia Taveras, Dkt. No. 22-2; Aff. Darnell Williams, Dkt. No. 22-3.

Plaintiffs Williams and Taveras filed suit in part to protect their similarly-situated classmates,

who were equally victims of Corinthian’s fraud, but who did not have the advantage of

knowing that they could contest the enforceability of their student loans on the basis of this

fraud, see Dkt. No. 99 at 6 (Order recognizing that the offset notice forms received by

Plaintiffs did not specifically refer to the “borrower defense” right articulated in 34 C.F.R. §

685.206(c)), Dkt. No. 101 at 2 (Defendant’s Status Report stating that the Secretary had

revised notice forms to specifically include a reference to borrower defenses), or that the

Attorney General had already made this assertion on their behalf. Plaintiffs’ agreement in

principle to settle the matter is attributable to their individual circumstances and does not

indicate an abandonment of concern for the legal principle they sought to—and did—establish

for the benefit of their classmates.

To be sure, Plaintiffs did not amend their Complaint or seek representative status of

their fellow classmates. This litigation decision was informed by their conclusion that such

steps were not necessary. The participation of the Commonwealth in the litigation assured

them that the broader interests of their classmates would be represented. Moreover, like the


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Court, Plaintiffs “presum[ed] that the defendant, a public official, will act in good faith and

comply with governing law as declared by the Court,” Order, Dkt. No. 35.

CONCLUSION

Based on the foregoing, the Plaintiffs support the motion of the Commonwealth to

compel compliance with this Court’s Order, or to intervene. Plaintiffs and their counsel have

information demonstrating the Secretary is failing to fully comply with the Order by

continuing to certify for tax offsets the debts of borrowers listed in Exhibit 4 of the DTR. The

Secretary should be barred from continuing to certify such debts because the Order makes

clear that the DTR was a valid invocation of a borrower defense on behalf of all borrowers

listed in Exhibit 4.

Respectfully submitted,

/s/ Eileen M. Connor Eileen M. Connor, BBO No. 569184 Toby R. Merrill, BBO No. 601071 Deanne B. Loonin, BBO No. 668231 Legal Services Center of Harvard Law School 122 Boylston Street Jamaica Plain, MA 02130 Phone: (617) 522-3003

*Jennifer Esch, law student on the Memorandum

Dated: March 27, 2019


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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on March 27, 2019, a true and correct copy of the foregoing Memorandum filed through the CM/ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF).

/s/ Eileen M. Connor Eileen M. Connor


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