UNITED STATES DISTRICT COURT FOR THE DISTRICT OF … · In January 2017, the Secretary moved to...

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UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF MASSACHUSETTS

DARNELL E. WILLIAMS and YESSENIA M. TAVERAS,

Plaintiffs,

v. ELISABETH DEVOS in her official capacity as Secretary of the United States Department of Education,

Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No. 16-11949-LTS

MOTION BY THE COMMONWEALTH OF MASSACHUSETTS

TO COMPEL COMPLIANCE WITH THIS COURT’S ORDER OR, IN THE ALTERNATIVE, TO INTERVENE

The Commonwealth of Massachusetts (the “Commonwealth”), by and through the Office

of Attorney General Maura Healey, respectfully moves to compel compliance with the Court’s

Order in this matter, Dkt. No. 99 (the “Order”), pursuant to Federal Rules of Civil Procedure 71,

or, in the alternative, to intervene pursuant to Federal Rules Civil Procedure 24 as a plaintiff-

intervenor in this action.

The motion to compel compliance pursuant to Rule 71 should be granted because the

Secretary of Education (the “Secretary”) refuses to comply with the Order that the letter from

Attorney General Healey to the Secretary dated November 30, 2015 regarding Corinthian

College, Inc. (“the DTR”) invoked a borrower defense proceeding on behalf of the borrowers

listed in Exhibit 4 to the DTR. The Order’s Conclusion was straightforward:

the Court determines that the DTR invoked a borrower defense proceeding on behalf of the people listed on Exhibit 4, including Williams and Taveras; that such

Case 1:16-cv-11949-LTS Document 115 Filed 02/26/19 Page 1 of 4

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a request was within Attorney General Healey’s authority to make; that such a request was not precluded by federal regulations, even in the absence of an attachment of a personal request emanating from each individual borrower; and that certification, without consideration of Attorney General Healey’s DTR submission, was arbitrary and capricious.

Dkt. No. 99 at 29.

Nevertheless, and contrary to the Order, the Secretary continues to maintain that the DTR

has not invoked a borrower defense proceeding on behalf of the people listed in Exhibit 4, other

than the two named Plaintiffs. A motion to enforce pursuant to Rule 71 is appropriate because

the Commonwealth is a non-party granted relief in the Order and the Secretary is not in

compliance with the Order. See Fed. R. Civ. P. 71. The Attorney General is the chief law

enforcer in the Commonwealth and has an important interest in having her authority to invoke

borrower defenses on behalf of defrauded Massachusetts students vindicated.

In the alternative, intervention is warranted as of right because the motion was

brought timely after the Commonwealth learned that the Secretary was not in compliance

with the Order and governing law as declared by the Court and because of important

interests described above. See Fed. R. Civ. P. 24(a)(2). Finally, even if the Court finds

that intervention is not warranted as of right, it should grant the Commonwealth

permissive leave to intervene because its claims share common questions of law and fact

with Plaintiffs’ complaint. See Fed. R. Civ. P. 24(b)(1)(B).

Pursuant to Local Rule 7.1(b)(1), the grounds for the Commonwealth’s motion are set

forth with specificity in the memorandum of law filed herewith.

WHEREFORE, the Commonwealth of Massachusetts respectfully request that the Court

grant its motion to enforce compliance with the Court’s Order, on the alternative, its motion to

intervene.


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REQUEST FOR ORAL ARGUMENT

The Commonwealth believes that oral argument may assist the Court and accordingly

requests a hearing on the motion.

LOCAL RULE 7.1(A)(2) CERTIFICATION

The undersigned counsel for the Commonwealth certifies that he has conferred by

telephone with counsel for Plaintiffs on February 22, 2019, and Defendant on February 25, 2019

to resolve or narrow the issue addressed in this motion. Plaintiffs assent to the Commonwealth’s

motion. Defendant notified the Commonwealth on February 26, 2019, that she opposes the

Commonwealth’s motion.

Respectfully submitted,

COMMONWEALTH OF MASSACHUSETTS ATTORNEY GENERAL MAURA HEALEY

/s/ Timothy S. Hoitink

Glenn S. Kaplan (BBO No. 567308) Timothy S. Hoitink (BBO No. 672661) Assistant Attorneys General Insurance and Financial Services Division Public Protection and Advocacy Bureau Office of the Attorney General One Ashburton Place Boston, MA 02108 (617) 963-2453 (Kaplan) (617) 963-2465 (Hoitink) [email protected] Dated: February 26, 2019 [email protected]


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CERTIFICATE OF SERVICE I, Timothy S. Hoitink, hereby certify that this document filed through the ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent to those indicated as non-registered participants by First Class Mail. Dated: February 26, 2019 /s/ Timothy S. Hoitink x Timothy Hoitink


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UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF MASSACHUSETTS

DARNELL E. WILLIAMS and YESSENIA M. TAVERAS,

Plaintiffs,

v. ELISABETH DEVOS in her official capacity as Secretary of the United States Department of Education,

Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) )

Civil Action No. 16-11949-LTS

MEMORANDUM IN SUPPORT OF MOTION BY THE COMMONWEALTH OF MASSACHUSETTS TO COMPEL COMPLIANCE WITH THIS COURT’S

ORDER OR, IN THE ALTERNATIVE, TO INTERVENE

The Commonwealth of Massachusetts (the “Commonwealth”), by and through the Office

of Attorney General Maura Healey, submits this memorandum of law in support of its motion to

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

Federal Rules of Civil Procedure 71, or, in the alternative, to intervene pursuant to Federal Rules

Civil Procedure 24 as a plaintiff-intervenor in this action.

At center in this case is the defense to repayment application submitted by the Attorney

General Healey to the Secretary of Education (the “Secretary”) dated November 30, 2015, laying

out clear and convincing evidence that establishes widespread fraud committed by Corinthian

Colleges, Inc. (“Corinthian”) against Massachusetts students (the “DTR”). The DTR requested

federal loan discharges for 7,200 students listed on Exhibit 4 (“Exhibit 4”) as permitted under

federal law and the terms of the loans themselves. Dkt. No. 47-1. Plaintiffs asserted, and


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Defendant disputed, that the DTR is sufficient to invoke a borrower defense to repayment on

behalf of the people listed in Exhibit 4. The Court squarely addressed the dispute as follows in

the Order’s conclusion:

the Court determines that the DTR invoked a borrower defense proceeding on behalf of the people listed on Exhibit 4, including Williams and Taveras; that such a request was within Attorney General Healey’s authority to make; that such a request was not precluded by federal regulations, even in the absence of an attachment of a personal request emanating from each individual borrower; and that certification, without consideration of Attorney General Healey’s DTR submission, was arbitrary and capricious.

Dkt. No.99 at 29. Nevertheless, and contrary to the Order, the Secretary continues to

maintain that the DTR did not invoke a borrower defense on behalf of the people listed in

Exhibit 4, other than the two named Plaintiffs. The Commonwealth brings this motion to

enforce full compliance with the Order.

BACKGROUND

This case arose out of the massive fraud at Corinthian, including the Everest Institute in

Massachusetts. The Commonwealth filed suit against Corinthian in Massachusetts Superior

Court against Corinthian in early 2014 after a thorough investigation. Dkt. No. 47-1 at 2. In

November 2015, Attorney General Healey sent substantial evidence demonstrating Corinthian’s

fraud to the Secretary in the DTR, together with a request for loan discharges for affected

Massachusetts borrowers. In support of her request, Attorney General Healey provided

thousands of pages of evidence that Corinthian repeatedly inflated its placement rates, lied to

prospective students about these rates, rushed and pressured students into uniformed and ill-

advised enrollment decisions, and failed to provide the quality education promised, among other

unfair and deceptive acts and practices. Dkt. No. 47-1. Attorney General Healey also submitted

identifying information about 7,200 Corinthian students in Exhibit 4. Id. In 2016, the


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Commonwealth obtained a final judgment against Corinthian in which the Massachusetts

Superior Court ordered restitution in the amount of $67,333,019—an amount equal to all funds

Corinthian acquired from graduates who enrolled between July 1, 2006 through June 30, 2014.

Dkt. No. 29-1 at 2, 10.

Plaintiffs Williams and Tavares were among the thousands of defrauded students listed in

Exhibit 4. Dkt. No. 29-1 at 12. In 2014, Plaintiffs defaulted on their student loans. AR at 488–

89, 814–15. In December 2015, the Department of Education (the “Department”) 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”). The Department made this

certification notwithstanding the considerable evidence it had received from Attorney General

Healey as well as other information in its possession at that time and without considering the

DTR. Dkt. No. 55 ¶¶ 11–14. In April and May 2016, the Department seized Plaintiffs’ tax

refunds. AR at 532, 818–19.

On September 28, 2016, Plaintiffs brought this lawsuit alleging the Secretary improperly

certified Plaintiffs’ student loan debts as legally enforceable for purposes of referral to the TOP.

In January 2017, the Secretary moved to dismiss Plaintiffs’ action. Dkt. Nos. 18, 19. Plaintiffs

opposed, Dkt. No. 22, and the Commonwealth filed an amicus brief in support of the opposition,

Dkt. No. 29. The Court allowed the motion to the extent the Amended Complaint, Dkt. No 5,

sought injunction relief or relief on behalf of persons other than Williams and Taveras. Dkt. No.

35. In granting this portion of the motion to dismiss, the Court noted that it “renders the first

portion of its ruling 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. The Court denied the

motion to dismiss in all other respects. Id.


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On October 24, 2018, this Court entered the Order after hearing Plaintiffs’ and

Defendant’s cross-motions for relief regarding involuntary collection actions. Among other

things, the Court concluded that the DTR had invoked a borrower defense proceeding on behalf

of each borrower listed in Exhibit 4. Dkt. No. 99 at 29. The Court ordered the Secretary to take

certain specific steps, including report on the status and timing of her decision with respect to

Plaintiffs borrower defense applications within sixty days. Id. at 29–30.

On November 28, 2018, counsel for the Commonwealth wrote to the Secretary seeking

confirmation that the Department intended to fully comply with the Court’s order and cease

involuntary collections against all borrowers listed in Exhibit 4 at least until it had rendered a

decision on the DTR. See First AG Letter, attached as Ex. A. On December 12, 2018, counsel

for the Secretary responded as follows: “Secretary intends to comply with the letter of the

Court’s Order and, accordingly, will describe her compliance efforts in a status report filed with

the court on or before December 24, 2018.” See First Secretary DeVos Letter, attached as Ex. B.

Counsel did not respond to the Commonwealth’s request that the Department confirm it intended

to cease involuntary collections against all borrowers listed in Exhibit 4 at least until it had

rendered a decision on the DTR. Id.

On December 20, 2018, the Secretary filed a status report outlining her compliance with

the Court’s order. Dkt. No. 101. In this, the Secretary noted that “[e]ffective 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,” id. ¶ 6, but did not describe what the

Secretary considered a borrower defense application. The Status Report, together with the

Secretary’s December 12, 2018 letter, created ambiguity about the Department’s compliance


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with the Order, specifically about whether it was treating the DTR as a borrower defense

application. The federal government then shut down between December 22, 2018 and January

25, 2019, and the case did not proceed during this time period.

On February 14, 2019, counsel for the Commonwealth sent a letter confirming its

understanding that the Secretary was not treating the DTR as a defense to repayment application

by each borrower listed in Exhibit 4 for purposes of involuntary collection and asked the

Secretary to let it know if its understanding of her position was incorrect. See Second AG Letter,

attached as Ex. C. Counsel for the Secretary responded on February 20, 2019, as follows: “the

Secretary does not interpret the Court’s October 24, 2018 Order (ECF No. 99) in the above-

captioned action as requiring the Department of Education to take any action with respect to any

individuals other than the two named Plaintiffs in this matter.” See Second DeVos Letter,

attached as Ex. D.

While the Commonwealth was conferring with Plaintiffs and Defendant about this

motion and waiting for Defendant’s position, the parties filed a joint notice of settlement in

principal. See Dkt. No. 112. The notice states that the “parties require additional time to finalize

the terms of the settlement and execute a settlement agreement.” Id. In other words, no

settlement has been finalized. As discussed below, this notice of settlement in principal

demonstrates the clear need for the Commonwealth to enforce or intervene to protect the

interests of the other 7,200 borrowers listed in Exhibit 4.

ARGUMENT

The Secretary is not complying with the Order and is instead ignoring the Court’s clear

conclusion that the DTR is a borrower defense claim on behalf of the borrowers listed in Exhibit

4. This Court should compel compliance to the Order, either by granting the Commonwealth’s


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motion to enforce as a non-party pursuant to Rule 71 or its motion to intervene. As discussed

below, the Court has ample authority to compel full compliance with respect to all borrowers

listed in Exhibit 4, not just the two named Plaintiffs.

I. THE COMMONWEALTH IS ENTITLED TO COMPEL THE SECRETARY TO COMPLY WITH THE ORDER PURSUANT TO RULE 71

The Court should compel the Department to comply with its Order because (i) the

Commonwealth can enforce the Order pursuant to Federal Rule of Civil Procedure 71; and (ii)

the record establishes that the Department is not in compliance with the Order.

A. The Commonwealth Can Enforce the Order

Federal Rule of Civil Procedure 71 states in full that “[w]hen an order grants relief for a

nonparty or may be enforced against a nonparty, the procedure for enforcing the order is the

same as for a party.” Rule 71, which has been in place in essentially identical form since 1937,1

was drafted for situations exactly like this one, where a court’s order has been made to the

benefit of a nonparty. See, e.g., Judicial Watch Inc. v. United States Dep’t of Commerce, 34 F.

Supp. 2d 28, 43 (D.C Cir. 1998) (“‘It seems clear that Rule 71 was intended to assure that

process be made available to enforce court orders in favor of and against persons who are

properly affected by them, even if they are not parties to the action.’”) (quoting Lasky v. Quinlan,

558 F.2d 1133, 1137 (2d Cir. 1977)); see also 12 Charles Alan Wright, Arthur R. Miller, and

Mary Kay Kane, Federal Practice and Procedure § 3032 (3d ed. 2018) (describing in what

circumstances a non-party can bring an action under Rule 71). This means that a nonparty

granted relief in an order may enforce obedience by a motion to compel. Brennan v. Nassau

County, 352 F.3d 60, 65 (2d Cir. 2003) (citation omitted).

1 It was amended in 1987 to make technical adjustments and again in 2007 to make further stylistic changes. Neither amendment was intended to change the substance of Rule 71. See Fed.R.Civ.P. 71, Advisory Committee Notes.


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Here the Commonwealth seeks to compel consideration of the DTR, the very subject of

the Order. The Court specifically noted that the DTR required the Secretary to render a decision

on the merits of the two named Plaintiffs, and broadly stated that the DTR invoked a borrower

defense proceeding on behalf of all borrowers included in Exhibit 4. In addition, the Order

clearly grants the Commonwealth relief, as it provides that the DTR invoked a borrower defense

proceeding, was within the Attorney General’s authority to make, and required consideration

before the Department certified borrower debt for collection. Dkt. No. 99 at 29.

In similar circumstances, courts have allowed nonparties to enforce consent decrees,

judgments, or other orders to vindicate their rights. For instance, in Berger v. Heckler, 771 F.2d

1556 (2d Cir. 1985), the court entered a consent decree directing the Secretary of Health and

Human Services to make Social Security payments to certain immigrants. The consent decree

provided a particular construction of the Supplemental Security Income (SSI) eligibility

provision, which benefited other unnamed applicants. The Second Circuit determined that these

unnamed but similarly situated individuals were permitted to intervene and seek to have the

Secretary held in contempt pursuant to Rule 71 when the Secretary did not comply with the

consent decree. Id. at 1565. Similarly, in California Dept. of Social Services v. Leavitt, 444 F.

Supp. 2d 1088 (E.D. Cal. 2006), judgment aff’d in part, rev’d in part, 523 F.3d 1025 (9th Cir.

2008), the court held that foster families, though nonparties, could move pursuant to Rule 71 to

enforce a prior judgment ordering retroactive payment of welfare benefits. These foster families

had foster care cases open after the court ordered the state Department of Social Services to

review all open foster care cases for determination of welfare eligibility in accordance with the

judgment. Id. at 1098.


http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2015883841&pubNum=0000506&originatingDoc=Ia1eb070b4b1211dab83abce0f17e0f80&refType=RP&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.History*oc.Keycite)http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=2015883841&pubNum=0000506&originatingDoc=Ia1eb070b4b1211dab83abce0f17e0f80&refType=RP&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.History*oc.Keycite)

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Rule 71 is designed for these precise circumstances, when a court order has been entered

providing the nonparty the relief it seeks and nothing remains but enforcement. It is particularly

true here, where the parties have filed notice of settlement and Plaintiffs presumably will no

longer seek relief under the Order. If the Commonwealth is not able to enforce the Order

pursuant to Rule 71 or otherwise intervene, it will have to file an independent action to re-litigate

matters already decided by the Court. Such an action would be duplicative and a waste of

judicial resources.

B. The Secretary is Not Complying with the Order

Because the Secretary is not complying with the Order, enforcement by the

Commonwealth under Rule 71 is warranted. The Court concluded that the DTR submission

“invoked the administrative remedy of Education’s review process such that Education was

required to adjudicate the request.” Dkt. No. 99 at 20. In order to “comply with governing law

as declared by the Court,” Dkt. No. 35, the Secretary must, at a minimum, ensure that each

individual listed in Exhibit 4 does not have an account certified for collection through Treasury

Offset.

Both explicit and implicit in the remedy ordered by the Court is the conclusion that the

DTR invokes a borrower defense proceeding on behalf of all the people listed in Exhibit 4. The

Court explicitly concluded that the DTR invoked a borrower defense proceeding on behalf of all

of these individuals. Dkt. No. 99 at 29. Beyond that, the Court’s conclusion that “Attorney

General Healey’s letter, Dkt. No. 47-1, required the Secretary to render a decision on the merits

of Williams and Taveras’s borrower defenses” in turn means that a decision must be rendered by

all affected Corinthian students. Id. at 30. Neither Plaintiff is identified uniquely in any way in

the DTR. They are similarly situated to the other 7,200 individuals listed in Exhibit 4. In fact,


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they are not even among those students who submitted individualized borrower defense claims in

connection with the DTR. Thus, there is no way to differentiate Plaintiffs from the other

individuals listed in Exhibit 4. In other words, consideration of the DTR for Plaintiffs is

consideration of the DTR for all former Corinthian students listed in Exhibit 4. As the court

noted in Feld v. Berger, 424 F. Supp. 1356 (S.D.N.Y.1976), while concluding that class

certification was unnecessary where plaintiffs sought injunctive and declarative relief against

certain practices,

The defendants are public officials charged with compliance with and enforcement of federal as well as state laws. The Court assumes these public officials, mindful of their responsibilities, will apply the determination here made equally to all persons similarly situated. “[I]t would be unthinkable that the . . . defendants would insist on other actions being brought” to vindicate the same rights at issue here.

Id. at 1363 (footnote omitted) (quoting Vulcan Soc’y v. Civil Serv. Comm’n, 490 F.2d 387, 399

(2d Cir.1973)).

Nevertheless, the Department has implemented the Order only with respect to Mr.

Williams and Ms. Tavares. Thus, it continues involuntary collections against borrowers identical

in all respects with the named Plaintiffs here. The Department’s cramped interpretation of the

Order is incorrect and it must be compelled to comply.

II. IN THE ALTERNATIVE, THE COMMONWEALTH IS ENTITLED TO INTERVENE IN THIS ACTION

Should the Court conclude that the Commonwealth is not entitled to relief pursuant to

Rule 71, the Commonwealth alternatively requests intervention into this matter. The

Commonwealth is entitled to intervene both as a matter of right and through the exercise of the

Court’s discretion for permissive intervention.2

2 The Commonwealth notes it has not filed a proposed pleading along with its motion. The First Circuit has rejected a hyper-technical reading of Rule 24(c), which calls on putative intervenors to serve on the parties “a pleading that


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A. The Commonwealth Has a Right to Intervene

Federal Rule of Civil Procedure 24(a)(2) allows intervention as of right for any party that

“claims an interest relating to the property or transaction that is the subject of the action, and is

so situated that disposing of the action may as a practical matter impair or impede the movant’s

ability to protect its interest, unless existing parties adequately represent that interest.” The First

Circuit applies the following four-factor test under the Rule: “a would-be intervenor must

demonstrate that: (i) its motion is timely; (ii) it has an interest relating to the property or

transaction that forms the foundation of the ongoing action; (iii) the disposition of the action

threatens to impair or impede its ability to protect this Case; and (iv) no existing party adequately

represents its interest.” Ungar v. Arafat, 634 F.3d 46, 50 (1st Cir. 2011) (citation omitted). The

Commonwealth satisfies each of these factors.

1. The Commonwealth’s motion is timely

The Commonwealth has moved in timely fashion to intervene. Timeliness, which “is of

first importance,” United Nuclear Corp. v. Cannon, 696 F.2d 141, 143 (1st Cir. 1982), is

determined by considering “the totality of the relevant circumstances,” Banco Popular de Puerto

Rico v. Greenblatt, 964 F.2d 1227, 1230 (1st Cir. 1992) (citations omitted). Post-judgment

intervention is proper, and often permitted, where the prospective intervenor’s interest does not

arise until after a judgment is entered. See Acree v. Republic of Iraq, 370 F.3d 41, 50 (D.C. Cir.

2004), abrogated on other grounds by Republic of Iraq v. Beaty, 556 U.S. 848 (2009) (citing 7C

sets out the claim or defense for which intervention is sought.” See Peaje Invs. LLC v. García-Padilla, 845 F.3d 505, 515 (1st Cir. 2017) (noting that “[s]everal circuits, including our own, have eschewed overly technical readings of Rule 24(c)” and concluding that “denial of a motion to intervene based solely on the movant’s failure to attach a pleading, absent prejudice to any party, constitutes an abuse of discretion.”). Where the intervenor does not attach a pleading, the Court “[relies] on facts made manifest in the record as a whole.” In re Efron, 746 F.3d 30, 32 (1st Cir. 2014). The Commonwealth is seeking relief based on a prior order of this Court. The filing of an additional pleading, namely a separate complaint, does not make appear to make sense at this stage of the litigation.


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Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane, Federal Practice and Procedure §

1916 (2d ed. 1986)).

The case law reflects four factors that inform the timeliness inquiry: “(i) the length of

time that the putative intervenor knew or reasonably should have known that his interests were at

risk before he moved to intervene; (ii) the prejudice to existing parties should intervention be

allowed; (iii) the prejudice to the putative intervenor should intervention be denied; and (iv) any

special circumstances militating for or against intervention.” R & G Mortgage v. Fed. Home

Loan Mortg. Corp., 584 F.3d 1, 7 (1st Cir. 2009) (citation omitted).

The Commonwealth has moved promptly after learning its interests were at risk. The

Commonwealth did not learn that the Secretary was not complying with the Order (or at least did

consider herself bound to follow the Order with respect to anyone other than the two named

Plaintiffs) until at least February 5. Subsequently, the Commonwealth wrote to confirm its

understanding on February 14, 2019, and heard back from the Secretary on February 20, 2019.

The Commonwealth has moved expeditiously while attempting to avoid utilization of the Court

to resolve the dispute. Since the purpose of intervention relates specifically to compliance with

the Order, timeliness should be gauged based on when the Commonwealth was able to ascertain

the Secretary’s non-compliance and unable to persuade the Secretary to change positions.

There is no prejudice to the other parties should intervention be allowed. Plaintiffs assent

to the Commonwealth’s motion and presumably see no prejudice to their position; in fact the

Commonwealth’s position is consistent with the relief that Plaintiffs have sought. There is no

prejudice to Defendant either; all that the Commonwealth requests is that the Secretary comply

with the Order and governing law as declared by the Court. It is difficult to argue that this could

prejudice the Secretary. See Feld, 424 F.Supp. at 1363 (“[I]t would be unthinkable that the . . .


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[public official] defendants would insist on other actions being brought to vindicate the same

rights at issue here.”) (internal quotation marks and citation omitted).

The Commonwealth would be prejudiced if intervention were not granted. As discussed

in Section II.A.2 below, it has important interests in this action in vindicating its right to submit

borrower defense to repayment claims and advocate on behalf of defrauded Massachusetts

students. This is an important matter of public policy which is a special circumstance auguring

in favor of intervention.

2. The Commonwealth has important interests in this action

The Commonwealth has sufficient interests in this action to justify intervention as of

right. To satisfy this second requirement, the movant must identify an interest “relating to the

property or transaction that is the subject of the action.” Fed. R. Civ. P. 24(a)(2). The interest

must be “direct” and “significantly protectable,” Ungar, 634 F.3d at 51 (quoting Donaldson v.

United States, 400 U.S. 517, 531 (1971)), but it need not “be of a legal nature identical to that of

claims asserted in the main action,” In re Lopez Soto, 764 F.2d 23, 26 (1st Cir. 1985) (citation

omitted).

Here, the Commonwealth has clear interests in this action. As discussed in detail in

Section I.A above, the Court concluded that the DTR was a borrower defense submission made

on behalf of each borrower listed in Exhibit 4, namely, every Massachusetts student defrauded

by Corinthian. Thousands of these students live in the Commonwealth and are burdened by

debts that impact their financial wellbeing and that of their families, in communities across

Massachusetts. The Commonwealth also has a clear interest in the vindication of its authority

through the Attorney General to submit borrower defenses to repayment, and to have such

applications considered by the Department. Allowing the Department to escape its obligations to


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properly consider the DTR would undermine the Commonwealth’s ability to protect all

consumers in Massachusetts from unfair and deceptive practices by predatory for-profit schools

and to ensure a level playing field for the many high-quality institutions of higher education

based in our state.

The Commonwealth anticipates that in opposition Defendant may refer to the dismissal

of an earlier action in the District of Columbia, Massachusetts, et al. v. U.S. Dep’t of Education,

et al., No. 17-CV-07106, Dkt. No. 30 (D.D.C. 2018), on standing grounds. This case differs

greatly from the prior litigation; most notably, here the Commonwealth is seeking to enforce an

existing Order and ensure recognition of its right through the Attorney General to submit

borrower defense to repayment claims to the Department, and to have such applications

considered by the Department. The Commonwealth seeks to vindicate a right that this Court has

already concluded it has. By contrast, in the dismissed matter the Commonwealth and other

states sought to challenge all collections against borrowers in cohorts where the Department had

issued finding. See id., Dkt. No. 21 at 30–31. It was a different case with a broader focus. The

district court’s conclusion there has no bearing on the issues before this Court. The

Commonwealth’s interest here could not be clearer.

3. The Commonwealth’s interests will be impaired absent intervention.

The Commonwealth needs to intervene in order that its interests not be impaired. In

addition to establishing a sufficient interest in the subject of the action, the proposed intervenor

must demonstrate that disposition of that action may, as a practical matter, “impair[s] or

impede[s] its ability to protect this interest.” Fed. R. Civ. P. 24(a)(2). In determining whether

this requirement is met, courts consider “the practical consequences of denying intervention.”

Fund for Animals, Inc. v. Norton, 322 F.3d 728, 735 (D.C. Cir. 2003) (citation and internal


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quotation omitted); accord Daggett v. Comm’n on Governmental Ethics & Election Practices,

172 F.3d 104, 110-11 (1st Cir. 1999) (holding that “‘practical’ test of adverse effect that governs

under Rule 24(a)” was “easily satisfied” by showing that proposed intervenor’s interests would

be “adversely affected” if lawsuit were lost). In Massachusetts, the Attorney General has a broad

statutory and common law mandate to represent the public interest. Attorney General v. Dime

Sav. Bank, 413 Mass. 284, 287 (1992). An action by the Attorney General uniquely protects the

interests of the Commonwealth in challenging the Secretary’s actions. An adverse ruling in this

litigation may create negative precedent concerning the Attorney General’s ability to vindicate

her right to have her submissions considered and to advance the interests of other defrauded

borrowers harmed in Massachusetts.

4. Existing parties do not adequately represent the Commonwealth’s interests.

Finally, no existing party adequately represents all of the Commonwealth’s interests in

this matter. The burden of showing that a proposed intervenor’s interests will not be adequately

represented by existing parties is a “minimal” one. See Trbovich v. United Mine Workers, 404

U.S. 528, 538 n.10 (1972); Maine v. Director, U.S. Fish & Wildlife Serv., 262 F.3d 13, 18 (1st

Cir. 2001). The intervenor “need only show that representation may be inadequate, not that it is

inadequate.” Conservation Law Found. of N. Eng. v. Mosbacher, 966 F.2d 39, 44 (1st Cir. 1992)

(citing Trbovich, 404 U.S. at 538 n.10). Here, the Commonwealth more than satisfies that

minimal burden. Its interests are “sufficiently different in kind or degree from those” of

Plaintiffs such that its interests cannot be represented. B. Fernandez & Hnos., Inc. v. Kellogg

USA, Inc., 440 F.3d 541, 546 (1st Cir. 2006) (citations omitted).

First, the Commonwealth has an interest in ensuring that the DTR be properly considered

a borrower defense on behalf of all borrowers listed in Exhibit 4. In contrast, named Plaintiffs


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have a specific interest in their own economic well-being and garnering their own relief. An

outcome in this case that forgave Plaintiffs’ debts but left thousands of other defrauded

Massachusetts borrowers facing involuntary collection may well be in their interests but does not

achieve the Commonwealth’s interests here. The fact that the parties have filed a notice of

settlement (although no final settlement has been reached), Dkt. No. 112, demonstrates all the

more clearly that the Commonwealth’s interests are not represented by the existing parties.

Second, the Commonwealth has sovereign interests that no other party could represent,

including having the Attorney General’s authority as chief law enforcer properly considered.

See, e.g., Massachusetts v. E.P.A., 549 U.S. 497, 520 (2007) (state interests are entitled to

“special solicitude”). As the Court noted in its Order, “Attorney General Healey stands in very

different shoes than a private lawyer seeking relief on behalf of a class of individuals whose

interests the private lawyer does not, by virtue of public office, routinely and presumptively

represent . . . .” Dkt. No. 99 at 23.

Consequently, no existing party can be expected to adequately represent the

Commonwealth’s specific interests in this matter.

B. The Court Should Exercise its Discretion to Grant Permissive Intervention

Even if the Court concludes that the Commonwealth does not meet the standard for

intervention as of right, it should nevertheless exercise its discretion to permit the

Commonwealth to intervene in this litigation. See, e.g., Morra v. Casey, 960 F. Supp. 2d 335,

338 (D. Mass. 2013) (concluding that while proposed intervenor was not entitled to intervene as

of right, “[n]evertheless, the court may allow [the proposed intervenor] to intervene under Rule

24(b)(2)”). Permissive intervention is appropriate where a party “has a claim or defense that

shares with the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(1)(B).

Courts have “broad discretion” in deciding whether or not to grant permissive intervention under


16

Rule 24(b). Travelers Indem. Co. v. Dingwell, 884 F.2d 629, 641 (1st Cir. 1989). The First

Circuit has articulated three factors to be considered in determining whether permissive

intervention is warranted, including whether: “(i) the applicant’s claim or defense and the main

action have a question of law or fact in common; (ii) the applicant’s interests are not adequately

represented by an existing party; and (iii) intervention would not result in undue delay or

prejudice to the original parties.” In re Thompson, 965 F.2d 1136, 1142 n.10 (1st Cir. 1992)

(citation omitted). For the reasons discussed above, the Commonwealth satisfies all three of

these considerations. The Commonwealth’s claim directly follows from the Order in the main

action. Further, the Commonwealth’s interests are broadly implicated by the Secretary’s refusal

to consider the DTR, and those interests are not adequately represented by the individual

plaintiffs who look (naturally) to their own best interests. Finally, allowing the Commonwealth

to intervene would not delay any aspect of this proceeding nor cause any prejudice to the existing

parties because the Commonwealth seeks only to enforce the existing Order and/or ensure

compliance with governing law as declared by this Court. In fact, Plaintiffs have assented to the

motion, showing they see no prejudice.

C. The Commonwealth Moves to Intervene to Enforce Compliance with the Order and Governing Law as Declared by the Court

The Commonwealth’s position is that the Order is clear and that it covers all

Massachusetts borrowers listed in Exhibit 4 to the DTR. But even if the Court concludes

otherwise, it has the authority to (and should) amend the Order to cover all of these borrowers

and ensure compliance with governing law.

As discussed above, while granting a portion of the motion to dismiss relating to

Plaintiffs’ request for injunctive relief or relief on behalf of persons other than Williams and

Taveras, the Court noted that it “renders the first portion of its ruling in light of the presumption


17

that the defendant, a public official, will act in good faith and comply with governing law as

declared by the Court.” Dkt. No. 35. It is clear that the Secretary is not doing so, or at very least

does not consider herself bound to do so, and has made no assurances that it will comply with

governing law.

This set of circumstances is not unprecedented, and this Court has ample discretion to

ensure compliance with governing law in addition to simply ordering compliance with the Order.

See 7A Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane, Federal Practice and

Procedure § 1785.2 (3d ed. 2018) (“In some of these cases the assumption that [government]

defendants would readily comply with respect to all affected persons proved unfounded. This

resulted in renewed litigation, with class certification then being allowed because the need to

bind defendant to a judgment on behalf of the entire class was apparent”). While in some of the

cases discussed below, the courts responded to non-compliance (or the risk of non-compliance)

with governing law by granting class certification, this Court can achieve the same result by

granting the Commonwealth’s motion to intervene and clarifying for the Secretary that the Order

covers all similarly situated Massachusetts borrowers. The Commonwealth is well-positioned to

represent the interests of the borrowers listed in Exhibit 4; indeed the Attorney General

submitted the DTR through her role as the Commonwealth’s chief law enforcer. See Sec’y of

Admin. & Fin. v. Att’y Gen., 367 Mass. 154, 159 (1975).

Courts have not indulged governmental defendants who comply with the letter of an

order but do not extend relief to similarly situated individuals. In Bizjak v. Blum, 490 F. Supp

1297 (N.D.N.Y. 1980), the plaintiffs challenged case-record access restrictions in fair hearings

involving Aid to Families with Dependent Children (“AFDC”) and the Medical-Assistance

programs. The court granted class certification to the plaintiffs because of the defendant’s


18

history of noncompliance with state-court decisions on this question and the defendant’s refusal

to assure that she would not continue to enforce the restrictions in the face of an individual

determination. Id. at 1301. Another federal court came to the same conclusion in another case

involving the same defendant. In Ram v. Blum, 533 F. Supp. 933 (S.D.N.Y. 1982), the court

approved class certification in a case challenging New York’s method for calculating the amount

of the monthly grant to families through the AFDC program. The court noted that it granted

class certification at least in part because the defendant made no commitment to providing relief

granted to the named plaintiff across the wider class, and in fact evinced the intention not to

provide relief to the broader class. Id. at 939. Other courts have required governmental

defendants to provide positive assurance they intend comply with the court’s order with respect

to other similarly situated individuals. See Catanzano by Catanzano v. Dowling, 847 F. Supp.

1070, 1079 (W.D.N.Y. 1994) (citing Doe v. Coughlin, 697 F. Supp. 1234, 1235 n. 4 (N.D.N.Y.

1988)); Calkins v. Blum, 511 F. Supp. 1073, 1089–90 (N.D.N.Y.1981), aff’d, 675 F.2d 44 (2d

Cir. 1982). See also Kansas Health Care Ass’n, Inc. v. Kansas Dept. of Social and

Rehabilitation Services, 822 F. Supp. 687, 689 (D. Kans. 1993) (denying class certification

because “[w]e have no reason to doubt that defendants would apply any changes made to the

reimbursement formula uniformly to nursing homes in Kansas”).

In this case, the Secretary has already made evident that she does not consider herself

bound to comply with the governing law as declared by the Court. If the Court concludes that

the Order did not cover all individuals listed in Exhibit 4, it should allow the Commonwealth’s

motion to intervene and expand the Order to cover each individual listed in Exhibit 4.

CONCLUSION

Based on the foregoing, the Commonwealth moves this Court to compel compliance with

its Order, or in the alternative, grant its motion to intervene. The Department should be barred


19

from involuntary collection against borrowers listed in Exhibit 4 of the DTR until it renders a

decision of the merits of the borrower defenses, including consideration of the borrower defenses

asserted in the DTR.

Respectfully submitted,

COMMONWEALTH OF MASSACHUSETTS ATTORNEY GENERAL MAURA HEALEY

/s/ Timothy S. Hoitink

Glenn S. Kaplan (BBO No. 567308) Timothy S. Hoitink (BBO No. 672661) Assistant Attorneys General Insurance and Financial Services Division Public Protection and Advocacy Bureau Office of the Attorney General One Ashburton Place Boston, MA 02108 (617) 963-2453 (Kaplan) (617) 963-2465 (Hoitink) [email protected] Dated: February 26, 2019 [email protected]

CERTIFICATE OF SERVICE I, Timothy S. Hoitink, hereby certify that this document filed through the ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent to those indicated as non-registered participants by First Class Mail. Dated: February 26, 2019 /s/ Timothy S. Hoitink x Timothy S. Hoitink


The Commonwealth of Massachusetts Office of the Attorney General

One Ashburton Place Boston, Massachusetts 02108

Maura Healey Attorney General

TEL: (617) 727-2200 www.mass.gov/ago

November 28, 2018

The Honorable Elisabeth DeVos United States Department of Education 400 Maryland Avenue, SW Washington, DC 20202

Re: Defense to Repayment Application

Dear Secretary DeVos:

I write to confirm that the Department of Education (the “Department”) intends to fully comply with the District Court’s decision in Williams v. DeVos, 16-CV-l 1949 (D. Mass. Oct. 24, 2018), ECF No. 99 (enclosed), and review and consider this Office’s Defense to Repayment Application dated November 25, 2015 (the “DTR”) submitted on behalf of students defrauded by Corinthian Colleges, Inc. (“Corinthian”). In addition, we are seeking your immediate confirmation that no involuntary collection activity against any borrower identified in the DTR will occur prior to the completion of this review. In particular, the Department should not certify or recertify debts for administrative offset or wage garnishment and should vacate any existing certifications.

The DTR submission arose out of the largest educational fraud in the history of this country. Corinthian’s misconduct resulted in hundreds of thousands of borrowers across the United States being saddled with mountains of debt in exchange for worthless, and often uncompleted, educational programs. The DTR explained in significant detail Corinthian’s illegal actions in Massachusetts, included over 2,700 pages of supporting evidence, and specifically identified in Exhibit 4 more than 7,000 students entitled to federal loan discharges. Exhibit 4 provided the names, contact information, campus attended, program, credential level, and enrollment date for each applicable student. There is no dispute that Corinthian defrauded its students; the Department itself has determined that Corinthian misrepresented job placement rates for many of its programs. The DTR submission included substantial evidence regarding Corinthian’s inflated job placement statistics, high-pressure sales tactics, and poor educational quality. Furthermore, our office obtained a wide-ranging state court judgment against the school for violations of the Massachusetts Consumer Protection Act, which we previously provided to you.

In Williams v. DeVos, the District Court concluded that the Attorney General’s Office may submit borrower defense claims and supporting evidence on behalf of Massachusetts residents:

Case 1:16-cv-11949-LTS Document 116-1 Filed 02/26/19 Page 1 of 32

http://www.mass.gov/ago

Andrew E. LellingUnited States Attorney District of Massachusetts

U.S. Department of Justice

Main Reception: (617) 748-3100 John Joseph Moakley United States Courthouse 1 Courthouse Way, Suite 9200 Boston, Massachusetts 02210

December 12, 2018

By Email and First Class MailGlenn Kaplan, Esq.Assistant Attorney General Office of the Attorney General Commonwealth of Massachusetts One Ashburton Place Boston, MA 02108

Re: Williams at al. v. DeVos, Civil Action No. 16-11949-LTS

Dear Attorney Kaplan:

I am in receipt of the letter dated November 28, 2018 that you sent to my client, Secretary Elisabeth DeVos, regarding the Court’s October 24, 2018 Order in the above-captioned litigation (“Order”).

As you are aware, in its Order, the Court:

(1) allow[ed] in part and deni[ed] in part the [67] plaintiffs’ Motion for Judgment, as described below;

(2) denie[d] the [80] Secretary’s Motion for Judgment;

(3) vacate[d] the certifications for offset as to Williams and Taveras;

(4) declarefd] that Attorney General Healey’s letter, Doc. No. 47-1, required the Secretary to render a decision on the merits of Williams and Taveras’s borrower defenses;

(5) remand[ed] this matter to the Secretary for redetermination of her certification decision, including consideration of the borrower defense asserted by Attorney General Healey’s letter, Doc. No. 47-1, on behalf of Williams and Taveras;

(6) order[ed] the Secretary to report on the status and timing of her decision in 60 days (12/24/2018); and


Glenn Kaplan, Esq. Assistant Attorney General Page 2

(7) retain[ed] jurisdiction of this matter in the event of an appeal from or challenge to the administrative decision ordered by paragraph 5 and any subsequent decision regarding certification for offset as to Williams and Taveras.

Williams at al. v. DeVos, Civil Action No. 16-11949-LTS, ECF No. 99. The Secretary intends to comply with the letter of the Court’s Order and, accordingly, will describe her compliance efforts a status report filed with the Court on or before December 24, 2018.

Please contact me directly should you have any further concerns regarding this litigation.

Very truly yours,

/s/ Jessica P. Driscoll

Jessica P. DriscollAssistant United States Attorney


[T]he Court finds that Attorney General Healey’s DTR submission was sufficient to require the Secretary to determine the validity of the plaintiffs’ borrower defense. It 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’sbehalf.

16-CV-l 1949, ECF No. 99, at *24. This conclusion follows clearly from Massachusetts law. As the Commonwealth’s chief law enforcer, the Attorney General has the duty and obligation to represent the public interest and the legal interests of its citizens. See Sec ’y of Admin. & Fin. v. Attorney Gen., 326 N.E.2d 334, 338 (Mass. 1975) (“The Attorney General. . . has a common law duty to represent the public interest.”); M.G.L c. 12, § 10 (“[The Attorney General] shall take cognizance of all violations of law or of orders of courts, tribunals or commissions affecting the general welfare of the people . ...”). The borrower defense regulation pursuant to which this Office submitted these borrower claims, 34 C.F.R. § 685.206(c), does not include or describe a specific form that must be submitted to present a borrower defense to repayment claim, nor limit itself to claims made directly by the borrower him or herself. The Department has no valid reason to reject the DTR submission on behalf of Massachusetts borrowers.

It is arbitrary and capricious for the Department to ignore these claims when instituting involuntary collection. The decision of an agency must be based upon on “a consideration of the relevant factors.” Marsh v. Or. Natural Res. Council, 490 U.S. 360, 378 (1989). To seize a defrauded student’s tax refund and garnish her wages without reviewing the evidence and defenses submitted on her behalf is the very definition of arbitrary and capricious. Williams v. DeVos, 16-CV-l 1949, ECF No. 99, at *29 (vacating the Department’s certification of plaintiffs’ debts because the DTR was not considered). Nor can the District Court’s order be limited to only the two named plaintiffs in that case; the Court made clear that the Attorney General’s Office has submitted borrower defense to repayment claims on behalf of all borrowers listed in Exhibit 4 to the DTR. See id. If it is arbitrary and capricious to ignore the DTR with respect to the two named plaintiffs, then it is arbitrary and capricious to ignore the DTR with respect to other similarly situated borrowers. The Department must reverse its unlawful actions.

The Department must cease all involuntary collection against the defrauded borrowers listed in Exhibit 4 of the DTR and render decisions on the merits of the defenses raised on behalf of all of the individuals covered by the DTR. Please have an appropriate Department official contact me at (617) 963-2453 or [email protected] by Wednesday, December 12, 2018, regarding this important issue. Thank you for your consideration and attention to this matter.

Sincerely,

Glenn KaplanAssistant Attorney GeneralInsurance and Financial Services Division

Enclosure

2


mailto:[email protected]

1

UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTS

) DARNELL E. WILLIAMS and ) YESSENIA M. TAVERAS, ) )

Plaintiffs, ) ) v. ) Civil No. 16-11949-LTS ) ELISABETH DEVOS,1 in her official ) capacity as Secretary of the U.S. ) Department of Education, ) )

Defendant. ) )

ORDER ON MOTIONS FOR JUDGMENT

October 24, 2018

SOROKIN, J.

This case alleges that the Secretary of Education (“the Secretary”) improperly certified

the student loan debts of plaintiffs Darnell Williams and Yessenia Taveras as legally enforceable

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

(“TOP”). Doc. No. 5. In January 2017, the Secretary moved to dismiss the case for lack of

jurisdiction, arguing, inter alia, that the plaintiffs’ claims are barred for failure to exhaust, and

that Taveras’s claims should be dismissed as unripe. Doc. Nos. 18, 19. Williams and Taveras

opposed, Doc. No. 22, and the Attorney General of Massachusetts, Maura Healey, filed an

amicus brief in support of the opposition, Doc. No. 29. The Court allowed the Secretary’s motion

insofar as the Amended Complaint, Doc. No. 5, sought injunctive relief or relief on behalf of

persons other than Williams and Taveras and denied the motion in all other respects pending

1 See Fed. R. Civ. P. 25(d) (providing for automatic substitution of successor to public official).

Case 1:16-cv-11949-LTS Document 99 Filed 10/24/18 Page 1 of 30Case 1:16-cv-11949-LTS Document 116-1 Filed 02/26/19 Page 3 of 32

2

filing of the administrative record. Doc. No. 35. The Secretary filed the administrative record on

November 17, 2017. Doc. No. 43.2 The plaintiffs subsequently filed a document from Attorney

General Healey that was in the Secretary’s possession when she certified the plaintiffs’ debts for

Treasury offset and moved to include it in the administrative record. Docs. No. 47-1, 46. Now

before the Court are the parties’ cross-motions for judgment on the record. Doc. Nos. 67, 80.

I. BACKGROUND

A. Facts3

The now-defunct Corinthian College was a large, for-profit company that formally

operated post-secondary schools around the country, including Everest Institute in Massachusetts

(“Everest”). Doc. No. 81 at 4; 81 Fed. Reg. 39,330, 39,335 (June 16, 2016). According to

Attorney General Healey, between 2007 and 2015, Corinthian College ran Everest, offering

courses in medical administration, medical insurance billing and coding, dentistry, and massage

therapy. Doc. No. 47-1 at 3. Also according to Attorney General Healey, Corinthian marketed

Everest to individuals who were unable to afford its programs, and as a result, the vast majority

of students who attended Everest borrowed money from the federal government under Title IV

of the Higher Education Act of 1965 (“Title IV”). Id. As of June 30, 2010, 89.9 percent of

Corinthian’s revenue came from Title IV loans. Id. at 4. In 2011, the Massachusetts Attorney

General’s Office initiated an investigation of Corinthian’s Everest campuses. Id.

Plaintiffs Williams and Taveras are two former Corinthian students. Williams attended

the Massage Therapy Program at Everest from March 29, 2011 to December 28, 2011. Doc. No.

2 The administrative record, Doc. No. 43, will be cited as “A.R.,” using the page numbers assigned by the agency that appear in the lower right-hand corner of each page. 3 Except as noted otherwise, these facts are undisputed.


3

22-3 ¶ 3; Doc. No. 29-1 at 12; A.R. at 513.4 Taveras enrolled in the Medical Assistant Program

at Everest on October 28, 2010 and graduated on July 14, 2011. Doc. No. 29-1 at 12; Doc. No.

22-2 ¶ 3. To pay for their respective programs, Williams and Taveras each obtained nearly

$10,000 in federal student loans through the Department of Education (“Education”). A.R. at 1-

9, 509–11, 533–41; Doc. No. 19-2 ¶¶ 14–15.

Both plaintiffs defaulted on their student loans in the fall of 2014. A.R. at 488–89, 814–

15. Both sets of loans were then transferred to the Education’s debt collection unit that winter.

A.R. at 509–11, 813–15. Then, in August 2015, Education sent each plaintiff an identical notice

(“the notice”) of its intent to refer their debts to the TOP. A.R. 490–95, 793–98; Doc. No. 19-2

¶¶ 12, 17.5 The notice stated:

The U.S. Department of Education (ED) holds one or more past due, legally enforceable, defaulted student loans or grant claims for which you are responsible. . . . ED will refer your debt to the U.S. Department of the Treasury (Treasury), unless you pay this debt in full, make satisfactory arrangement to repay it, or make a timely, valid objection to enforcement of the debt. ED will request that Treasury deduct the amount of this debt . . . from any payment streams authorized by law. . . . These payment streams . . . include . . . Federal and/or State income tax refunds[.]

A.R. at 797.

The notice advised in bold, underlined text that “Neither [Education] nor Treasury

[would] provide an additional notice and opportunity to review records or to object to

4 There is some discrepancy in the record as to whether Williams graduated or withdrew from Everest. Compare A.R. at 513 (the Secretary’s records listing Williams’s “Withdrawal Date” as December 28, 2011), with Doc. No. 29-1 at 12 (the Massachusetts Attorney General’s Office’s records listing Williams’s graduation date as December 28, 2011). Williams, by affidavit before this Court, has stated that he “graduated with a certificate in Massage Therapy in December 2011.” Doc. No. 22-3 ¶ 3 (emphasis added). 5 Through TOP, the Department of the Treasury (“Treasury”) may collect a debt owed to an agency by reducing the amount of the debtor’s tax refunds, if owed, by an amount equal to their debt and then paying that amount to the agency. See 31 U.S.C. § 3701(a)(1) (defining “administrative offset”); 31 C.F.R. § 285.2(a) (defining “tax refund offset”).


4

collection of [the] debt before a Treasury offset.” Id. (emphasis in original). The notices

informed Williams and Taveras of their rights with respect to the proposed offset, including the

rights to review documents, object to the amount or existence of the debt, seek review by

Education of such objections, and have a lawyer represent them in exercising their rights. Id.

With respect to the right to object, the notices advised Williams and Taveras of various

objections they could make, including:

1) “The debt is not past due at this time;” 2) “The debt is not legally enforceable against you at this time because, for example,

you have filed bankruptcy and your case is still pending; the debt was discharged in a past bankruptcy; the loan was canceled for the death or disability;”

3) “The School owed you a refund for the period for which the loan was made, but did not pay the refund, or paid only part of the refund;” and

4) “The school you attended closed during the period for which the loan was made, or you did not have a high school diploma or GED and the school improperly determined that you could benefit from its training.”

Id. This list identifies grounds that fall outside the scope of the Secretary’s interpretation of “not

legally enforceable,” but does not specifically reference the “borrower defense” defined in 34

C.F.R. § 685.206(c), which is discussed further below. The objections listed are not defined as

exclusive.

The notices admonished that “[t]o have [Education] review your objections to the

collection of the debt(s), you must make a written request for review within 65 days of the date

of the Debt Statement,” id., but they also provided that a review of certification for offset could

be obtained even if a person “miss[ed] the deadlines in [the] Notice,” id. at 798. The notices did

not elaborate on the circumstances under which Education would consider a late notice.

However, the notices further stated that, once Education certifies a debt to Treasury for offset,

Education will not withdraw that request, even if a defense to repayment is submitted, “until [the

person objecting] prove[s] that the debt is not legally enforceable or not past-due.” Id. The


5

notices additionally provided that, if a borrower presents written objections to repayment,

Education will send “a written decision explaining whether [Education] will collect the debt in

whole or in part, the reasons why, and the amount to be collected,” and if the borrower disagrees

with Education’s decision, the borrower may have the “decision reviewed by bringing a lawsuit

in Federal district court.” Id.

Additionally, attached to each notice was a “Request for Review” form. Those forms

stated: “If you object to offset against your . . . tax refunds . . . you can use this form[.]” Id. at

795. The forms included a list of objections to offset, advising the debtor to check “the

objections that apply.” Id. The list included the same objections described within the notices, as

well as the following additional objections:

1) “I do not owe the full amount shown because I repaid some or all of this loan[;]” 2) “I am making payments on this loan as required under the repayment agreement I

reached with the holder of the loan[;]” 3) “I am totally and permanently disabled[;]” 4) “This is not my Social Security Number, and I do not owe this loan[;]” 5) “I believe that [the school] without my permission signed my name on the loan

application[;]” and6) a catch-all, “I believe that this loan is not an enforceable debt6 in the amount

stated for the reason explained in the attached letter . . . (for example, the loan was

6 During the hearing, counsel for the Secretary urged the Court to construe a debt that is not “legally enforceable” for purposes of 31 C.F.R. § 285.2(d), which enumerates the criterion for referral of a debt to TOP, to include only those debts with legal bars to collection—i.e., bars to collection created by statute or Court stay. The meaning given to “not an enforceable debt” in the Secretary’s form is broader than this construction. The sole specific example provided in the form of “not an enforceable debt” is “the loan was obtained by another person through the crime of theft of your identity,” which is not a bar to collection created by statute, Court order, or regulation, but rather a defense that could be asserted in Court as a defense against repayment of a loan. More generally, the form invites objection based upon “any other reason not listed,” a ground nowhere limited by the “legally enforceable” definition. The language in the Secretary’s form is also different from that in her regulation, as the regulation refers to legal enforceability, see 31 C.F.R. § 285.2(d) (emphasis added), whereas the form refers only to enforceability more generally. For this reason, and the further reason that the catch-all also suggests identifying “any other reason,” the Court construes the catch-all as encouraging the submission of objections such as a borrower defense rather than merely legal bars to collection.


6

obtained by another person through the crime of theft of your identity, or any other reason not listed above).”

Id. at 795–96. The objections listed on the review form, like the objections recited in the notice

of proposed offset, do not specifically reference the “borrower defense” defined in 34 C.F.R.

§ 685.206(c), although the form does include a catch-all category which suggests submitting

“any other reason.”

The 65-day window to file a request for review, as described in the notices received by

Williams and Taveras, expired in mid-October 2015. Neither filed an objection prior to the

deadline. On November 30, 2015, after the 65-day window but before Education’s certification

of the plaintiffs’ debts, Attorney General Healey wrote to the Secretary. Doc. No. 29 at 1. She

had been investigating Corinthian for three years. Doc. No. 47-1 at 4. Based on the evidence

gathered during the investigation, she found “Corinthian engaged in a pattern of unfair and

deceptive conduct in violation of Massachusetts consumer protections laws,” and, on April 3,

2014, she filed a lawsuit against Corinthian in Suffolk Superior Court on behalf of all Everest

students. Id. The action was stayed while Corinthian was in bankruptcy proceedings and so, at

the time of Attorney General Healey’s writing to the Secretary, was still ongoing. Id.

In this writing to the Secretary, which Attorney General Healey calls a “defense to

repayment” application (“the DTR”),7 she requested “the immediate discharge” of federal

student loans taken in connection with Everest, “full refunds to borrowers of amounts paid on the

loans and the reversal of negative credit reporting.” Doc. No. 47-1 at 3. In support of her request,

Attorney General Healey attached exhibits with information from former Everest students. Id. at

7 The Court refers to Attorney General Healey’s writing using the name she gave the document in her amicus brief before the Court. See Doc. No. 29.


7

6. Among those are Exhibits 3 and 4, which are before the Court either under seal or in redacted

form.

Exhibit 3 to the DTR is a collection of over 30 separate documents, each concerning one

specific former Everest student. See Doc. No. 93.8 These DTR forms submitted by Attorney

General Healey were not completed versions of Education’s request for review form attached to

its notice of possible offset. However, the submitted forms did include, as to each student, dates

of enrollment, contact and identifying information (including Social Security numbers), a list of

deceptive practices of Everest with checkmarks next to those practices that influenced the

specific student’s decision to attend, and the student’s signature. Id. They also included, as to

each student, signed authorization for Attorney General Healey to access information regarding

the status of the student’s loan(s) and to act on the student’s behalf. Id. Regarding the Exhibit 3

students, the DTR requested that Education “review [the] individual proffers [in Exhibit 3], as

supplemented by [Attorney General Healey’s] submission, and promptly discharge the

applicants’ federal student loans.” Doc. No. 47-1 at 6. Exhibit 3 does not contain forms from

Taveras or Williams.

Williams and Taveras appear in Exhibit 4, which contains information about an

additional 7,200 Everest students in the form of a spreadsheet with a one-line entry for each

student. Doc. No. 47-1 at 6, Doc. No. 29-1 at 12. Each entry includes the student’s name, dates

of enrollment, contact information, and programs attended. Doc. No. 29-1 at 12. The entries do

not include the students’ Social Security numbers, nor do they include statements from the

students as to how they were personally influenced by Corinthian’s illegal conduct. Id. Attorney

8 Attorney General Healey provided Exhibit 3 to the Secretary pursuant to a Common Interest Agreement that prevented its disclosure. Doc. No. 93. Because Exhibit 3 is replete with former students’ personally identifiable information, the Secretary filed it with the Court under seal. Id.


8

General Healey did not submit signed forms from the students that appear on Exhibit 4. Attorney

General Healey requested in the DTR that Education “provide a swift, wholesale, and automatic

discharge” of the federal student loans of all Everest students in Massachusetts (presumably a

potentially larger group than the students listed on Exhibit 4), including the 7,200 students shown

in Exhibit 4. Doc. No. 47-1 at 6. In a footnote, Attorney General Healey also stated:

Given the enclosed evidence of widespread abuse, it is important that the Department of Education automatically discharge the loans of Corinthian’sMassachusetts borrowers, and not require borrowers to submit individual applications. It is well beyond the resources of borrowers to investigate cohort placement rates or aggregate witness statements. Navigating defense to repayment applications and gathering associated required documentation can also present significant hurdles, particularly in the case of a closed school like Corinthian. If the Department cannot create an automatic discharge process, we urge the Department to put measures in place to assist borrowers in asserting their individual defense to repayment, as part of the debt collection process.

Id. at 6 n.5.

At the time Attorney General Healey submitted the DTR (and at the time the Secretary

sent the notices to Williams and Taveras), the Secretary had a regulation providing that “in any

proceeding to collect on a Direct Loan, the borrower may assert as a defense against repayment,

any act or omission of the school attended by the student that would give rise to a cause of action

against the school under applicable State law,” which “proceedings include . . . [t]ax refund

offset proceedings.”34 C.F.R. § 685.206(c)(1). When a borrower defense claim is successful, the

Secretary must “notif[y] the borrower that the borrower is relieved of the obligation to repay all

or part of [her] loan[.]” Id. at § 685.206(c)(2).9 The notices sent to Williams and Taveras did not

refer to this regulation.

9 The contracts that Williams and Taveras signed to receive federal student loans also provided: “[Y]ou [the borrower] may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done[.]” A.R. at 7.


9

In the DTR, Attorney General Healey cited specifically this regulation and asserted that

relief was due under it for each of the three described categories of Everest students (students

listed on Exhibit 3, students listed on Exhibit 4, and all students in Massachusetts) because

Corinthian had violated Massachusetts consumer protection laws, thereby “providing Everest

MA students with defenses to repayment of their student loans.” Doc. No. 47-1 at 5. She then

detailed—in a nearly 60-page discussion—the ways Corinthian had violated Massachusetts laws

and deceived Everest students. See generally Doc. No. 47-1. For instance, according to the DTR,

Corinthian misrepresented its in-field placement rates at Everest, which Corinthian advertised as

“often in excess of 70%,” id. at 3, when actual in-field placement rates were as low as 20 to 40

percent depending on the program, id. at 24. The document also described Corinthian’s

misrepresentation of the quality of career services and quality and type of classroom instruction

at Everest. For example, in promotional material, Corinthian promised “programs specifically

designed to provide hands-on training” but, in reality, most training at Everest was “self-taught

instruction from workbooks.” Id. at 35. And, although Corinthian promised “experienced

instructors” with “industry-specific expertise,” instructors were “unqualified, uninformed, and

unconcerned with teaching.” Id. at 38–39. “Many instructors were from temp agencies and some

never taught in a classroom before.” Id. In addition, Corinthian advertised its “professional-level

standards for conduct and behavior” and “inspirational classroom discussions,” but students

instead found the school environment to be “a free-for-all,” “unprofessional,” and “neglectful.”

Id. at 40–41. Students reported “serious problems of drug use and violence” at Everest. Id. at 42.

The document cited these practices and others as establishing violations of the Massachusetts

Consumer Protection Act. Id. at 7.


10

On or about December 9, 2015, without having yet responded in writing to Attorney

General Healey, the Secretary certified the plaintiffs’ debts to Treasury for collection by offset.

A.R. at 532, 833. The administrative record before the Court constitutes the entire record of the

decision to certify the plaintiffs’ debts for collection by Treasury offset. That record does not

include any portion of the DTR, any reference to it, or any information provided in it. By

affidavit, Education says it considered Exhibit 3—but not Exhibit 4—of the DTR “to constitute

applications for Borrower Defense discharge.” Doc. No. 55 ¶¶ 11–14.10 Accordingly, “Education

did not consider Plaintiffs Williams and Taveras as having applied for Borrower Defense

discharge in connection with [the DTR.]” Id. ¶ 15. The administrative record includes no

suggestion that the Secretary rendered a decision on the merits of the defense to repayment

asserted by Attorney General Healey’s letter on behalf of Williams and Taveras.

On January 8, 2016, Education responded to Attorney General Healey in a two-page

letter, acknowledging receipt and careful review of the DTR and its attachments. Doc. No. 93-1.

In the response, Education requested additional information about Corinthian’s job placement

rates and corroborating documentation of Corinthian’s alleged misrepresentations in its

advertising materials. Id. at 2–3. Education also affirmed its commitment “to providing a fair,

transparent, and efficient process for debt relief for all students who believe they have been

defrauded by their colleges” and its anticipation of “receipt of the [additional requested]

information [from Attorney General Healey] . . . and . . . working with [Attorney General

Healey] for the benefit of Massachusetts students.” Id. at 3. Education, in this response, did not

address whether it viewed the DTR as a request for review or borrower defense under 34 C.F.R.

10 Education has indicated that at least one student whose information appeared in Exhibit 3 of the DTR has received the requested relief. Doc. No. 55 ¶ 17.


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§ 685.206(c) on behalf of the students named in Exhibits 3 or 4 of the DTR, nor did it request

clarification. Nowhere in the response letter did Education reject or even acknowledge Attorney

General Healey’s request that Education discharge the Corinthian loan debts of the students

listed on Exhibit 4 without requiring each student to initiate personally a borrower defense to

repayment proceeding complete with individual submission of evidence.

Without further correspondence with Attorney General Healey,11 on April 27, 2016,

Education seized Williams’s tax refund in an amount of $1,263, A.R. at 523, and, on May 25,

2016, it seized Taveras’s tax refund in an amount of $4,999, A.R. at 818–19.12

On June 3, 2016, after the Secretary certified Taveras’s debt for collection by offset,

Taveras personally submitted a borrower defense claim. A.R. at 834–38; Doc. No. 19-2 ¶ 20.

Following this submission, on October 26, 2016, the Secretary suspended collection actions on

Taveras’s debt. Doc. No. 19-2 ¶ 20. Taveras’s debt remains certified and, more than two years

post-submission, her borrower defense claim remains pending. Doc. No. 19-4 at 28. The record

is devoid of anything suggesting either that Education has taken any action toward deciding

Taveras’s claim or that there is a predictable timeline for when a decision will be rendered.

In June 2016, in the lawsuit Attorney General Healey brought on behalf of all Everest

students, the Suffolk Superior Court issued a judgment against Corinthian. In August 2016, it

ordered restitution in an amount of $67,333,091—equal to “the total of all monies acquired by

11 The Court ordered the Secretary to file “any responses to [Attorney General Healey’s] letter by Defendant.” Doc. No. 89 (emphasis added). She filed only the January 8, 2016 letter. See Doc. No. 93. 12 Taveras filed her taxes jointly with her spouse; the tax refund seized was her joint tax refund. Doc. No. 19-1 ¶ 8. Because the Internal Revenue Service found Taveras’s husband was an “injured spouse” entitled to “innocent spouse” relief, see 26 U.S.C. § 6015, in October 2016, Treasury returned the full amount of the seized refund to Taveras and her husband. A.R. at 818-19, 821.


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[Corinthian] from graduates enrolling in [Everest] during the period July 1, 2006 through June

30, 2014.” Doc. No. 29-1 at 2, 10.

B. The Regulatory Scheme

When a person defaults on a loan owed to a federal agency, United States law permits

collection of that debt through a variety of means, including tax refund offset. 31 U.S.C.

§ 3720A(a). Collection by offset is conducted through TOP. 31 C.F.R. § 285.5. An agency that is

owed a debt may refer a “past-due, legally enforceable debt” to TOP. 31 U.S.C. § 3720A(a).

Upon receiving such a referral, the Secretary of the Treasury reduces the amount of the

defaulter’s tax refund, if owed, by an amount equal to his debt. Id. at 3720A(c). The Secretary of

the Treasury then pays that amount to the referring agency. Id.

Treasury has established regulations that govern what must be done before a debt may be

referred to TOP. Before an agency may refer a debt, the agency must, inter alia: (1) notify the

person incurring the debt of the agency’s intent to collect the debt by tax refund offset; (2) allow

the person an opportunity for a review of the agency decision to certify the debt; (3) allow the

person to present evidence that the debt is not past due or not legally enforceable; (4) consider

“any evidence presented by [the] person;” and (5) determine that the debt is past due and legally

enforceable. 31 U.S.C. §§ 3716(a)(3), 3720A(b); 31 C.F.R. § 285.2(b)–(d) (emphasis added). For

the purposes of TOP, Treasury has defined “past due” and “legally enforceable” narrowly. A

debt that is “past due” is one that “has not been paid by the date specified in the agency’s initial

written demand for payment, or applicable agreement or instrument[,]” and a debt is “legally

enforceable” when “there has been a final agency determination that the debt, in the amount

stated, is due, and there are no legal bars to collection by offset.” 31 C.F.R. § 285.5(b). The

regulation does not define “legal bar” but states that such debts “include, but are not limited to,


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debts subject to the automatic stay in bankruptcy proceedings or debts covered by a statute that

prohibits collection of such debt by offset.” Id.

Treasury’s regulations do not limit an agency from considering other defenses to

collection prior to certification. In fact, Congress has required the Secretary, “[n]otwithstanding

any other provision of Federal or State law,” to “specify in regulations which acts or omissions

of an institution of higher education a borrower may assert as a defense to repayment of a loan.”

20 U.S.C. § 1087e(h). The Secretary’s regulation providing for the assertion in tax refund offset

proceedings of “any act or omission of the school . . . that would give rise to a cause of action

against the school under applicable State law,” 34 C.F.R. § 685.206(c)(1), was issued pursuant to

this statutory duty.13

Another set of regulations more specifically governs collection by tax refund offset of

debt owed to Education. 34 C.F.R. §§ 30.24, 30.33. The Secretary’s regulations require that she

allow a debtor 65 days from the date notice is provided to the debtor of the Secretary’s intent to

collect by offset to request a review by Education of the existence, amount, enforceability, or

past-due status of the debt. 34 C.F.R. § 30.33. Per the Secretary’s regulations, a request for

review must identify “the debtor and the particular debt, including the debtor’s Social Security

number and the program under which the debt arose” as well as an “explanation of the reasons

the debtor believes that the notice the debtor received . . . inaccurately states any facts or

conclusions relating to the debt.” 34 C.F.R. § 30.24(a)–(b). Once a request for review is

submitted, the Secretary, must “[r]eview[] the documents submitted by the debtor and other

13 The Secretary’s regulations also provide grounds for discharge of a loan obl

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