The Department of Education (ED) took one step last week in its attempt to better regulate the “for profit” colleges, universities, and other schools: ED published a revision of a preamble to rules that the United States Court of Appeals for the District of Columbia Circuit remanded because the prior explanation was inadequate. Amending a preamble, however, may just be confusing, and may spawn more litigation.
Also last week, ED’s latest attempt in litigation fell flat: to salvage some of the rules previously struck down by the United States District Court for the District of Columbia. The court was not impressed that ED had presented a ground for amending its judgment.
Background: The United States Court of Appeals for the District of Columbia Circuit in a lengthy opinion discussed last June vacated or remanded significant parts of the ED’s signature Higher Education Act (HEA) regulations of for profit schools in Association of Private Sector Colleges and Universities v. Duncan (II). The court of appeals:
- affirmed the judgment of the District Court holding that the Compensation Regulations do not exceed statutory limits, but remand two aspects of the Compensation Regulations because ED failed to provide an adequate or reasoned explanation of (1) elimination of the safe harbor based on graduation rates provision, and (2) potential adverse effect on minority enrollment.
- held that the Misrepresentation Regulations exceed statutory limits in three respects: by (1) allowing enforcement actions against schools without procedural protections; (2) proscribing misrepresentations on subjects that are not covered by the statute; and (3) proscribing statements that are merely confusing.
- held that the distance education regulation was not a logical outgrowth of the proposed rules.
Thus, in Duncan II, the court of appeals affirmed in part and reversed in part Career College Association v. Duncan (I).
In separate litigation also reviewed here, United States District Court for the District of Columbia, less than a month later, vacated and remanded more of the rules in Association of Private Sector Colleges and Universities v. Duncan (III): ED failed to provide a reasoned basis for the debt repayment standard of the debt regulation, and the district court vacated that provision. The opinion illustrates DOE’s quintessentially arbitrary choice and caprice:
The debt repayment standard, by contrast, was not based upon any facts at all. No expert study or industry standard suggested that the rate selected by the Department would appropriately measure whether a particular program adequately prepared its students. Instead, the Department simply explained that the chosen rate would identify the worst-performing quarter of programs. Why the bottom quarter? Because failing fewer programs would suggest that the test was not “meaningful” while failing more would make for too large a “subset of programs that could potentially lose eligibility.”
Additionally, the court found that the repayment rate test cannot be severed from the other debt measures and, thus, the majority of the related rules could not stand and were vacated as well.
ED Responds to the Court of Appeals: In a unique approach to the remand, ED revised the preamble discussion to its 2010 final regulations on private for profit college program integrity, but ED did not revise or re-promulgate the rules. ED addresses in this Program Integrity Issues “final rule” published March 22, 2013, the elimination of a safe harbor provision that the court found ED had inadequately explained. The “revisions to preamble” are precisely that: amendments not to regulatory text, but amendment to the preamble discussion as if it were a correction. This poses several interesting issues aside from the substance of the discussion and the rule.
►The amendment to the preamble does not contain any promulgatory “words of issuance” – a bridge between the preamble and the regulatory changes that it proposes or makes or re-promulgates. Without more, this “final rule” is not a final rule, but a notice, and may not be a “final agency action” upon which a party could bring suit under the Administrative Procedure Act (APA). ED provides no justification for this process under the APA. This may be a unique occurrence – and other examples and comments are always invited.
►If ED believes that this new explanation resolves the court’s finding of inadequacy, it may need to file a motion to amend the court’s judgment to that effect, but that is not entirely clear, nor is it clear that this action satisfies the requirements of the Administrative Procedure Act (APA).
►ED’s proffered substantive explanation may be inadequate and has not been tested in the crucible of public comment. Whether this new rationale is arbitrary and capricious may be challenged anew – whether ED has complied with the remand does not require that ED take some new final agency action. The process itself, however, belies one of the inadequacies of a remand without vacating a rule under Allied Signal – the agency may act in a far less definitive manner than promulgating a new rule. This instance may be a cause for rearguing Allied Signal and returning to the APA’s original notion that a court must “set aside” a procedurally or substantively defective rule, a point raised in opinions by Senior Judges Sentelle and Randolph.
►ED does not address the court’s remand of provisions of ED’s misrepresentation regulations states that it will publish a separate “notice” addressing those issues. The notice, however, seems to mix some of the misrepresentation issues into the safe harbor issue. ED seems intent on creating new issues.
Seeking Relief in the District Court: Also last week, the District Court in, Duncan (IV), denied the Department of Justice (DOJ)’s latest motion to alter or amend the judgment (Rule 59(e)) in Duncan III, which vacated specific provisions of the rule. ED had argued that the disclosures provisions that the court upheld could not be fully effective without both the vacated reporting requirements and portions of the vacated debt measures. As the court found, the reporting requirement violated Congress’s bar of a database.
►What the court did not mention is that ED seems to have its cart before its horse: the agency is responsible for complying with statutory requirements; it is not the court’s responsibility to permit violation of one statutory requirement to permit the agency to more effectively implement another regulation. ED really needs to start over.