LAUREL BEELER, United States Magistrate Judge.
This case concerns regulations promulgated under Title IV of the Higher Education Act of 1965 ("HEA"), as amended, which authorizes the Secretary of Education and the Department of Education (collectively, "Department") to establish loan and grant programs to help students pay for post-secondary education.
In December 2016, the Department promulgated regulations ("Distance-Education Rules") intended to combat fraudulent practices relating to distance education and correspondence courses and to provide students and the public with disclosures about educational institutions that offered such programs (e.g., "online universities"). The rules originally were to go into effect in July 2018. But in July 2018, following a change in presidential administrations, the Department promulgated a regulation delaying the effective date of the Distance-Education Rules until July 2020 ("Delay Rule") and raised the prospect that it would revise and reconsider the Distance-Education Rules entirely.
In the HEA, Congress imposed a statutory requirement on the promulgation of all Title IV regulations. They must be subject to "negotiated rulemaking" — a process where the Department selects a committee of experienced individuals nominated by groups involved in student-financial-assistance programs to negotiate proposed rules — unless the Department "determines that applying such a requirement
The National Education Association ("NEA"), the California Teachers Association ("CTA"), and individual plaintiffs Shane Heiman, Kwynn Uyehara, and Stephanie Portilla — NEA and CTA members who are enrolled or considering enrolling in online-education programs — filed this case to challenge the Delay Rule. The plaintiffs argue that the Department's failure to submit the Delay Rule to negotiated rulemaking violated the HEA and the Administrative Procedure Act ("APA"). They argue that the Delay Rule thus should be vacated and the Distance-Education Rules be allowed to go into effect as originally planned. The Department responds that it had "good cause" under Section 553(b)(3)(B) of the APA to forgo negotiated rulemaking because it would have been impracticable to submit a proposed delay rule to negotiated rulemaking, to complete that process, and to promulgate a final delay rule, before the effective date of the Distance-Education Rules. The Department also argues that any failure to engage in negotiated rulemaking was harmless error that does not warrant vacating the Delay Rule. The parties filed cross-motions for summary judgment.
The supposed insufficient time to promulgate a rule delaying the effective date of the Distance-Education Rules is not good cause to forgo the HEA's statutorily mandated negotiated-rulemaking process. Additionally, the supposed lack of time resulted from the Department's own delay, and an agency's own delay is not good cause. Furthermore, the Department's failure to engage in negotiated rulemaking here was not harmless error. The court grants the plaintiffs' motion for summary judgment, denies the defendants' motion for cross-summary judgment, and orders the Delay Rule vacated (but stays the vacatur for 30 days from the date of this order).
Title IV of the HEA "assist[s] in making available the benefits of postsecondary education to eligible students ... in institutions of higher education" through federal grants and financial-assistance programs. 20 U.S.C. § 1070.
"Congress created the Title IV programs to foster access to higher education." Ass'n of Private Sector Colls. and Univs. v. Duncan, 681 F.3d 427, 435 (D.C. Cir. 2012). "Every year, Congress provides billions of dollars through loan and grant programs to help students pay tuition for their postsecondary education." Id. at 433. "The Department of Education (`the Department' or `the agency') administers these programs, which were established under Title IV[.]" Id. "Students must repay their federal loans; the costs of unpaid loans are borne by taxpayers." Id.
"To participate in Title IV programs — i.e., to be able to accept federal funds — a
"Congress has delegated to the Secretary [of Education] the authority to promulgate regulations governing the Department's administration of Title IV and other federal programs." Id. at 436. "The grant of authority provides that `[t]he Secretary, in order to carry out functions otherwise vested in the Secretary by law or by delegation of authority pursuant to law, ... is authorized to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of operation of, and governing the applicable programs administered by, the Department.'" Id. (citing 20 U.S.C. §§ 1098a(a)(1), 1221e-3). This authority to promulgate regulations extends to regulations defining what is "legally authorized" for purposes of the HEA. Id. at 458-59 ("This is a federal program, federal dollars are at stake, and the most sensible reading of the statute is that the Secretary has discretion to determine what is `legal authorization' in order to protect federal interests.") (quoting Sistema Universitario Ana G. Mendez v. Riley, 234 F.3d 772, 778 (1st Cir. 2000)).
In general, under the HEA, all regulations pertaining to Title IV are subject to "negotiated rulemaking." 20 U.S.C. § 1098a(b)(2).
In negotiated rulemaking, the Department selects individuals nominated by "groups involved in student financial assistance programs under [Title IV], such as students, legal assistance organizations that represent students, institutions of higher education, State student grant agencies, guaranty agencies, lenders, secondary markets, loan servicers, guaranty agency servicers, and collection agencies" to participate in the negotiations process. 20 U.S.C. § 1098a(a)(1), (b)(1), (b)(2). The HEA requires the Department to "select individuals with demonstrated expertise or experience in the relevant subjects under negotiation, reflecting the diversity in the industry, representing both large and small participants, as well as individuals serving local areas and national markets." 20 U.S.C. § 1098a(b)(1), (b)(2).
If the negotiated-rulemaking participants reach a consensus about proposed regulations, the Department must propose the consensus for promulgation, unless it reopens the negotiated-rulemaking process or provides a written explanation why it is not proposing the consensus. 20 U.S.C. § 1098a(b)(2) ("All published proposed regulations shall conform to agreements resulting from such negotiated rulemaking unless the Secretary reopens the negotiated rulemaking process or provides a written explanation to the participants in that process why the Secretary has decided to depart from such agreements.").
The Department may bypass the negotiated-rulemaking process only if it "determines that applying such a requirement with respect to given regulations is impracticable, unnecessary, or contrary to the public interest (within the meaning of
The Distance-Education Rules were the product of a multi-year rulemaking process.
On May 1, 2012, the Department published a notice in the Federal Register of its intent to convene a negotiated-rulemaking committee "to develop proposed regulations designed to prevent fraud and otherwise ensure proper use of Title IV, HEA program funds, especially within the context of current technologies." Negotiated Rulemaking Committee; Public Hearings, 77 Fed. Reg. 25,658, 25,658 (May 1, 2012).
On April 16, 2013, the Department announced that it was "considering regulatory changes related to State authorization for programs offered through distance education or correspondence education" and was adding "State authorization for programs offered through distance education or correspondence education" as a topic for consideration for action by the next negotiated-rulemaking committee. Negotiated Rulemaking Committee; Public Hearings, 78 Fed. Reg. 22,467, 22,468 (Apr. 16, 2013). The Department "also announce[d] three public hearings at which interested parties may comment on the new topics suggested by the Department and may suggest additional topics for consideration for action by the negotiated rulemaking committee." Id. at 22,467. The Department further stated that "[f]or anyone unable to attend a public hearing, the Department will accept written comments." Id.
On May 13, 2013, the Department announced a fourth public hearing and extended its deadline for the submission of written comments. Negotiated Rulemaking Committee; Public Hearings, 78 Fed. Reg. 27,880, 27,880 (May 13, 2013).
On November 20, 2013, the Department announced that it would convene a negotiated-rulemaking committee to address a number of topics, including "State authorization for programs offered through distance education or correspondence education." Negotiated Rulemaking Committee, Negotiator Nominations and Schedule of Committee Meetings — Title IV Federal Student Aid Programs, Program Integrity and Improvement, 78 Fed. Reg. 69,612, 69,613 (Nov. 20, 2013). The Department requested nominations for individual negotiators representing key stakeholder constituencies, namely:
Id. at 69,612, 69,614.
The Department selected a negotiated-rulemaking committee of 18 representatives (two Department representatives and 16 stakeholder-constituency representatives) and 15 alternate representatives. See Program Integrity and Improvement, 81 Fed. Reg. 48,598, 48,600-01 (July 25, 2016) (Distance-Education-Rules NPRM). The committee met in 2014 on February 19 to 21, March 26 to 28, April 23 to 25, and May 19 to 20 to develop proposed regulations. Id. at 48,601. The committee agreed to negotiate an agenda of six issues related to student financial aid, including "State authorization of distance education." Id.
Under the committee's protocols, the committee had to reach a consensus on all six issues, with no committee member expressing dissent, in order to reach a final consensus. Id. If the committee had reached a consensus, then the Department would have used the consensus-based language in its proposed regulations and would not have been able to alter the consensus-based language unless it reopened the negotiated-rulemaking process or provided a written explanation to the committee members regarding why it decided to depart from that language. Id.; see 20 U.S.C. § 1098a(b)(2). The committee did not reach a final consensus. Distance-Education-Rules NPRM, 81 Fed. Reg. at 48,601. Because the committee did not reach a consensus, the Department had discretion regarding the regulations it proposed on the issues that were subject to the committee's negotiations. Id.
On July 25, 2016, the Department published a Notice of Proposed Rulemaking ("NPRM"), proposing what would become the Distance-Education Rules. Distance-Education-Rules NPRM, 81 Fed. Reg. 48,598.
The Department reported that "[t]he Office of the Inspector General (OIG), the Government Accountability Office (GAO), and others have voiced concerns over fraudulent practices, issues of noncompliance with requirements of the title IV programs, and other challenges within the distance education environment." Id. at 48,598. "Such practices and challenges include misuse of title IV funds, verification of student identity, and gaps in consumer protections for students." Id. "Documented wrong-doing has been reflected in the actions of multiple State attorneys general who have filed lawsuits against online education providers due to misleading business tactics." Id. at 48,599. "For example, the attorney general of Iowa settled a case against a distance education provider for misleading Iowa students because the provider stated that their educational programs
The Department observed that that "[t]he HEA established what is commonly known as the program integrity `triad' under which States, accrediting agencies, and the Department act jointly as gatekeepers for [Title IV] Federal student aid programs[.]" Id. at 48,598. "Because institutions that offer distance education programs usually offer the programs in multiple States, there are unique challenges with respect to oversight of these programs by States and other agencies." Id. "Many States and stakeholders have expressed concerns with these unique challenges, especially those related to ensuring adequate consumer protections for students as well as compliance by institutions participating in this sector." Id. "For example, some States have expressed concerns over their ability to identify which out of State providers are operating in their States; whether those programs prepare their students for employment, including meeting licensure or certification requirements in those States, the academic quality of programs offered by those providers, as well as the ability to receive, investigate and address student complaints about out-of-State institutions." Id.
The Department announced its proposed rules to "establish[] requirements for institutional disclosures to prospective and enrolled students in programs offered through distance education or correspondence courses, which we believe will protect students by providing them with important information that will influence their attendance in distance education programs or correspondence courses as well as improve the efficacy of State-based consumer protections for students." Id. at 48,599. "These disclosures will provide consistent information necessary to safeguard students and taxpayer investments in the title IV, HEA programs." Id. "[R]equiring disclosures that reflect actions taken against a distance education program, how to lodge complaints against a program they believe has misled them, and whether the program will lead to certification or licensure[,] will provide enrolled and prospective students with important information that will protect them." Id. The Department extended the public 30 days (i.e., until August 24, 2016) to submit written comments on its proposed rules. Id. at 48,598.
The Department received 139 written comments and also had a consultative meeting with staff from the Department of Defense. Program Integrity and Improvement, 81 Fed. Reg. 92,232, 92,333 (Dec. 19, 2016) (Distance-Education-Rules Announcement).
On December 19, 2016, the Department promulgated the final Distance-Education Rules. Distance-Education-Rules Announcement, 81 Fed. Reg. 92,232 (amending 34 C.F.R. §§ 600.2, 600.9(c)-(d), and 668.2, and promulgating 34 C.F.R. § 668.50). The Distance-Education Rules required that (among other things) educational institutions that offered distance-education or correspondence-course programs meet certain requirements and issue certain disclosures, both publicly and individually to their enrolled and prospective students.
Among other things, the Distance-Education Rules required that educational institutions that offer distance-education or correspondence-course programs "document that there is a State process for review and appropriate action on student complaints from any of those enrolled students concerning the institution" in each state in which its enrolled students reside
In announcing the Distance-Education Rules, the Department addressed comments that it received on its initial NPRM. Id. at 92,233-52.
Several commenters noted that some states, such as California, did not have processes for reviewing complaints brought by students within the state against educational institutions located outside the state, and that the Rules thus appeared to prohibit the use of Title IV funding to pay for students in those states to enroll in distance-education or correspondence-course programs from institutions outside those states. Id. at 92,238. The Department confirmed that the Rules prohibited that use of Title IV funding unless those states provided a complaint process, either directly or through a state-authorization-reciprocity agreement. Id. Several commenters also asked for clarification about the definition of the term "reside" as used in the Rules. Id. at 92,249. The Department stated that where a student "resides" under the Rules was defined by "a student's true, fixed, and permanent home of a student, usually where their domicile is located" and that "a student is considered to reside in a State if the student meets the requirements for residency under State law[.]" Id. at 92,250.
The Distance-Education Rules were to go into effect on July 1, 2018. Id. at 92,232.
On January 20, 2017, Donald Trump was inaugurated as president of the United States.
On January 24, 2017, President Trump's chief of staff issued a memorandum instructing federal agencies, including the Department, that "[w]ith respect to regulations that have been published in the [Office of the Federal Register] but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum, subject to [certain] exceptions..., for the purpose of reviewing questions of fact, law, and policy they
On January 30, 2017, the Department announced that it was delaying the effective date of regulations promulgated under the Every Student Succeeds Act. Elementary and Secondary Education Act of 1965, as Amended by the Every Student Succeeds Act — Accountability and State Plans; Open Licensing Requirement for Competitive Grant Programs; Family Educational Rights and Privacy Act, 82 Fed. Reg. 8669 (Jan. 30, 2017). In that announcement, the Department stated that "[t]his is the first of several regulatory actions the Department intends to take regarding regulations that have been published in the Federal Register but had not taken effect as of January 20, 2017, including the Department's regulations for ... State Authorization (RIN 1840-AD20) issued under title IV of the Higher Education Act of 1965, as amended" (i.e., the Distance-Education Rules). Id. at 8669.
On June 16, 2017, the Department announced its intention to convene two negotiated-rulemaking committees, one to revise certain "gainful employment" regulations that the Department had promulgated in 2014 and one to revise regulations on student-borrower defenses to repayment of federal loans that the Department promulgated in 2016. Negotiated Rulemaking Committee; Public Hearings, 82 Fed. Reg. 27,640, 27,640 (June 16, 2017).
On June 22, 2017, the Department announced that it was "seeking input on regulations that may be appropriate for repeal, replacement, or modification." Evaluation of Existing Regulations, 82 Fed. Reg. 28,431, 28,431 (June 22, 2017). The Department extended the public sixty days (i.e., until August 21, 2017) to submit comments. Id.
On August 1, 2017, the Western Interstate Commission for Higher Education ("WICHE") Cooperative for Educational Technologies ("WCET") and the WCET State Authorization Network ("SAN") submitted an eight-page written response to the Department's June 22, 2017 request for input on regulations that may be appropriate for repeal, replacement, or modification. Letter from Russ Poulin, Director, Policy and Analysis, WICHE Cooperative for Educ. Techs., and Cheryl Dowd, Director, WCET State Authorization Network, to Hilary Malawer, Assistant Gen. Counsel, Office of the Gen. Counsel, U.S. Dep't of Educ. (Aug. 1, 2017), available at https://www.regulations.gov/document?D=ED-2017-OS-0074-0073 (last visited Apr. 26, 2019) (2017 WCET Letter).
In the Letter, WCET and SAN stated that they "support[ed] the intent of these regulations to tie title IV funding to the requirement that institutions verify that they are following applicable laws in the states where the institutions are serving students" and "support[ed] the intent of the regulations to require important general disclosures as well as individualized disclosures to the students." Id. at 1-2. WCET and SAN stated that:
Id. at 6-7 (bolding in headings added).
WCET and SAN raised several issues, stating that they "wish[ed] to obtain clarification of terms important for the implementation of the regulations." Id. at 2. In addition to other issues, WCET and SAN raised the following.
First, WCET and SAN asked whether the Department planned to enforce the Distance-Education Rules on July 1, 2018. Id. at 3. They noted that the Department had recently delayed enforcement and/or compliance with gainful-employment and borrower-defenses regulations (the regulations for which the Department had announced in June 2017 that it was convening negotiated-rulemaking committees). Id.
Second, WCET and SAN raised a question about the Distance-Education Rules' requirement that educational institutions make disclosures based on where enrolled students "reside." Id. at 3-4. They noted that the term "reside" is confusing, particularly in the context of a student who is located in and taking classes from a state other than the state of the student's "official residency," and asked the Department to provide guidance or to set out its requirements based on where students are "located," as opposed to where they "reside." Id. at 4.
Third, WCET and SAN raised a question about the Distance-Education Rules' requirement that educational institutions document that there is a state process for review and appropriate action on student complaints in each state where their students reside. Id. at 5. They noted that California in particular does not have a process for receiving complaints from students located in California about educational institutions not in California (and that California had not entered into a state-authorization-reciprocity agreement). Id. They asked whether the Department could work with California on a compromise. Id.
WCET and SAN "request[ed] that the Department indicate a timeline to expect to receive a response to comments," stating that "compliance requirements for the federal state authorization regulations will require time to implement a process to achieve compliance by July 1, 2018" and that "[the Department's] response and direction will be very important." Id. at 7.
On August 25, 2017, the Department announced two public hearings where interested parties could provide input "on Department regulations related to postsecondary education that may be appropriate for repeal, replacement, or modification." Regulatory Reform; Public Hearings, 82 Fed. Reg. 40,518, 40,518 (Aug. 25, 2017). On October 1, 2017, WCET and SAN appeared at a public hearing and reiterated their support for the Distance-Education Rules and re-raised the questions they had raised in their 2017 Letter, including their questions about whether the Department would enforce the Rules beginning July 1, 2018 and about how the Department was defining the word "reside" as used in the Rules. U.S. Dep't of Educ., Transcript of Public Hearing on Regulatory Reform 166-72 (Oct. 4, 2017), available at https://www2.ed.gov/policy/highered/reg/reform/2017/washingtondchearingtranscript.pdf (last visited Apr. 26, 2019).
The Department did not take any steps in 2017 to propose a rule delaying the effective date of the Distance-Education Rules.
On February 6, 2018, the American Council on Education ("ACE") sent the Department a one-page letter. Letter from Terry W. Hartle, Senior Vice President, Am. Council on Educ., to Betsy DeVos, Sec'y of Educ., U.S. Dep't of Educ. (Feb.
Id.
Id.
On May 25, 2018, the Department published a Notice of Proposed Rulemaking, proposing a rule to delay the effective date of the Distance-Education Rules from July 1, 2018 to July 1, 2020. Program Integrity and Improvement, 83 Fed. Reg. 24,250 (May 25, 2018) (Delay-Rule NPRM). The Department stated that it "propose[d] the delay based on concerns recently raised by regulated parties and to ensure that there is adequate time to conduct negotiated rulemaking to reconsider the final regulations, and as necessary, develop revised regulations." Id. at 24,250.
The Department stated that "[t]wo letters in particular prompted this proposed delay": the 2018 ACE Letter and the 2018 WCET Letter. Id. at 24,251. The Department stated that the 2018 ACE Letter
Id. (quoting 2018 ACE Letter). The Department stated that the 2018 WCET Letter
Id. (citing 2018 WCET Letter).
The Department stated that "[t]hese issues are more complex than we understood when we considered them in 2016." Id. "The Department does not believe guidance would be sufficient to address the complexities institutions have encountered, even prior to the rule's effective date." Id. "For both of the residency and disclosure issues, guidance is not the appropriate vehicle to provide the clarifications needed." Id. "Guidance is inherently non-binding and, therefore, could not be used to establish any new requirements." Id. "More importantly, due to the complexity of these issues, we are not confident that we could develop a workable solution through guidance and without the input of negotiators who have been engaged in meeting these requirements." Id. "Additionally, the necessary changes may impose a greater burden on some regulated parties, or could significantly minimize burden to institutions, which would require an updated estimate of regulatory impact." Id. "In sum, the Department believes that the clarifications requested are so substantive that they would require further rulemaking including negotiated rulemaking under the Higher Education Act of 1965, as amended (HEA)." Id.
The Department stated that "[i]t would be confusing and counterproductive for the [Distance-Education Rules] to go into effect before the conclusion of this reconsideration process." Id. at 24,252. It thus "propose[d] delaying the current effective date — July 1, 2018 — until July 1, 2020." Id.
The Department did not submit its proposed delay rule to negotiated rulemaking. Instead, it stated that "has not had sufficient time to effectuate this delay through negotiated rulemaking." Id. "Negotiated rulemaking requires a number of steps that typically takes the Department well over 12 months to complete." Id. "In this instance, the catalysts for the delay are the February 6 [2018 ACE Letter] and February 7 [2018 WCET Letter]." Id. "The Department could not have completed the well-over 12-month negotiated rulemaking process, described in the previous paragraph, between February 6, 2018, and the July 1, 2018, effective date." Id. "Thus, the Department has good cause to waive the negotiated rulemaking requirement with regard to its proposal to delay the effective date of the final regulations to July 1, 2020, in order to complete a new negotiated
The Department extended the public until June 11, 2018 (i.e., 17 days) to submit comments on its proposed delay rule. Id. at 24,250.
The Department received 39 comments. Program Integrity and Improvement, 83 Fed. Reg. 31,296, 31,297 (July 3, 2018) (Delay-Rule Announcement).
On July 3, 2018, the Department promulgated the final Delay Rule. Delay-Rule Announcement, 83 Fed. Reg. 31,296.
While the Delay-Rule Announcement purports to be dated June 28, 2018, id. at 31,303, it was not published in the Federal Register until July 3, 2018, id. at 31,296, two days after the original effective date for the Distance-Education Rules.
The HEA provides that:
20 U.S.C. § 1098a(b)(2).
The parties agree that this negotiated-rulemaking provision applies to the Delay Rule.
The Department argues that it had good cause under Section 553(b)(3)(B) to forgo negotiated rulemaking with respect to the Delay Rule and that any failure to engage in negotiated rulemaking was harmless error. Both arguments fail.
"Good cause" under Section 553 of the APA "is determined on a `case-by-case' basis, based on the `totality of the factors at play.'" California v. Azar, 911 F.3d 558, 575 (9th Cir. 2018) (citing United States v. Valverde, 628 F.3d 1159, 1164 (9th Cir. 2010)). The Ninth Circuit and other courts have identified several generally applicable principles regarding the good-cause standard.
"`The good cause exception goes only as far as its name implies: It authorizes departures from the APA's requirements only when compliance would interfere with the agency's ability to carry out its mission.'" Id. (quoting Riverbend Farms, Inc. v. Madigan, 958 F.2d 1479, 1485 (9th Cir. 1992)). "Good cause is to be `narrowly construed and only reluctantly countenanced.'" Id. (quoting Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir. 1984)). "[T]he good cause exception should be interpreted narrowly, so that the exception will not swallow the rule" and should be found "only when `delay would do real harm.'" Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir. 1982) (citing cases). "As such, the good cause exception is usually invoked in emergencies, and an agency must `overcome a high bar' to do so." Azar, 911 F.3d at 575 (citing Valverde, 628 F.3d at 1164-65).
Good cause may be found where "`delay would do real harm' to life, property, or public safety." Id. at 576 (some internal quotation marks omitted) (quoting East Bay Sanctuary Covenant v. Trump, 909 F.3d 1219, 1253 (9th Cir. 2018)).
By contrast, "an agency's desire to eliminate more quickly legal and regulatory uncertainty is not by itself good cause," because "[i]f `good cause' could be satisfied by an Agency's assertion that normal procedures were not followed because of the need to provide immediate guidance and information, then an exception to the notice requirement would be created that would swallow the rule." Id. (internal brackets and ellipsis and some internal quotation marks omitted) (quoting Valverde, 628 F.3d at 1167). Similarly, "`[g]ood cause cannot arise as a result of the agency's own delay, because otherwise,
"A new administration's simple desire to have time to review, and possibly revise or repeal, its predecessor's regulations falls short of this exacting [good-cause] standard." Pineros y Campesinos Unidos del Noroeste v. Pruitt, 293 F.Supp.3d 1062, 1067 (N.D. Cal. 2018) (citing Clean Air Council v. Pruitt, 862 F.3d 1, 9 (D.C. Cir. 2017)). Likewise, "[t]hat a regulated entity might prefer different regulations that are easier or less costly to comply with does not justify dispensing with notice and comment" and does not constitute good cause. NRDC, 894 F.3d at 115 (citing Mack Trucks, Inc. v. EPA, 682 F.3d 87, 94 (D.C. Cir. 2012)); accord Bauer v. DeVos, 325 F.Supp.3d 74, 100 (D.D.C. 2018) (same) (citing Mack Trucks, 682 F.3d at 94).
The burden is on the agency to demonstrate that it has good cause. NRDC, 894 F.3d at 113-14 (citing Action on Smoking and Health v. Civil Aeronautics Bd., 713 F.2d 795, 801 n.6 (D.C. Cir. 1983)); accord Azar, 911 F.3d at 575 ("an agency must `overcome a high bar' to [invoke the good-cause exception]") (citing Valverde, 628 F.3d at 1164-65). An agency's determination that it has satisfied the good-cause exception is not entitled to deference from a court. Reno-Sparks Indian Colony v. EPA, 336 F.3d 899, 909 n.11 (9th Cir. 2003) ("Court[s] review[] de novo the agency's decision not to follow the APA's notice and comment procedures. The agency is not entitled to deference because complying with the notice and comment provisions when required by the APA `is not a matter of agency choice.'") (quoting Sequoia Orange Co. v. Yeutter, 973 F.2d 752, 757 n.4 (9th Cir. 1992)); accord, e.g., Sorenson Commc'ns Inc. v. FCC, 755 F.3d 702, 706 (D.C. Cir. 2014) ("[W]e cannot find that an exception applies simply because the agency says we should.... Deference to an agency's invocation of good cause — particularly when its reasoning is potentially capacious, as is the case here — would conflict with this court's deliberate and careful treatment of the exception in the past.").
To invoke the good-cause exception and forgo negotiated rulemaking, the Department must "publish[] the basis for such determination in the Federal Register at the same time as the proposed regulations in question are first published." 20 U.S.C. § 1098a(b)(2). In claiming that it had good cause to forgo negotiated rulemaking for the Delay Rule, the Department thus is limited to the explanations it provided in the Delay-Rule NPRM. Cf. Bauer, 325 F.Supp.3d at 97-98, 100 (analyses that do not appear in the Department's NPRM "lie outside the bounds of proper consideration").
The Delay-Rule NPRM did not identify any emergency or "real harm" that would have resulted from subjecting its delay proposal to negotiated rulemaking. Cf. Azar, 911 F.3d at 575; Buschmann, 676 F.2d at 357. The Delay-Rule NPRM did not identify how subjecting the Department's delay proposal to negotiated rulemaking would have interfered with the Department's ability to carry out its statutory duties. Cf. Azar, 911 F.3d at 576. Instead, the Delay-Rule NPRM offered as "good cause" only that it would have been
The District Court for the District of Columbia recently rejected a similar attempt by the Department to forgo negotiated rulemaking by promulgating a rule to delay the effective date of certain regulations promulgated by the prior administration. Bauer, 325 F.Supp.3d at 74. In November 2016, the Department promulgated regulations regarding student-borrower defenses to federal-loan repayment. Bauer, 325 F.Supp.3d at 81. The regulations were to go into effect on July 1, 2017. Id. In June 2017, the Department published a notice delaying the effective date of the regulations pending resolution of certain judicial challenges to the regulations, id. at 83, and in October 2017, the Department issued a NPRM proposing a rule to further delay the effective date of the regulations
The court granted the plaintiffs summary judgment and vacated the Department's delay rule. Id. at 110; Bauer v. DeVos, 332 F.Supp.3d 181, 186 (D.D.C. 2018). Among other things, the court held that the Department had not identified any "emergency" or "serious harm" that would have resulted from subjecting its delay proposal to negotiated rulemaking. Bauer, 325 F.Supp.3d at 99 (citing Jifry v. FAA, 370 F.3d 1174, 1179 (D.C. Cir. 2004)). The Department argued that it had been planning to change the borrower-defense regulations and that, absent a delay, the 2016 regulations would go into effect before the Department could make its changes and regulated parties would have to comply with them, thereby subjecting those parties to additional costs and confusion. Id. at 100-01. The court rejected this argument, holding that "the good cause exception should be `narrowly construed and only reluctantly countenanced,'" and that regulated parties' interest in avoiding the administrative costs of complying with the 2016 regulations did not meet the good-cause standard. Id. at 100 (quoting Mack Trucks, 682 F.3d at 94). The court held that accepting the Department's argument would lead to the good-cause exception "swallow[ing] the rule," because an agency could always use that excuse to delay the effective date of regulations. Id. at 101; accord id. at 99 ("Indeed, if [the Department's argument] was sufficient, it is difficult to imagine a circumstance in which an agency would be required to comply with the requirements of notice and comment and, where applicable, negotiated rulemaking, to delay the effective date of a regulation.").
The Second Circuit recently rejected an analogous attempt by an agency to forgo notice and comment under the APA by promulgating a rule to delay the effective date of certain regulations promulgated by the prior administration. NRDC, 894 F.3d 95. In December 2016, the National Highway Traffic Safety Administration ("NHTSA") promulgated penalty rates for car manufacturers that violated fuel-efficiency standards. Id. at 102. The rates were to go into effect starting with cars manufactured for model-year 2019. Id. Between January and July 2017, the NHTSA promulgated a series of rules delaying the effective date of the 2016 penalty rates. Id. at 102-03. The last of these rules suspended the 2016 penalty rates indefinitely on the ground that NHTSA was reconsidering the rates altogether. Id. at 103. The NHTSA did not subject these rules to notice and comment under the APA. Id. Environmental organizations and a coalition of states brought suit to challenge the delays. Id.
The NHTSA argued that it had good cause to forgo notice-and-comment rulemaking for the indefinite-suspension rule because the underlying 2016 penalty rates would otherwise "imminent[ly]" go into effect. Id. at 114. The Second Circuit rejected this argument, noting that the penalty rates were promulgated in December 2016, that the NHTSA chose to issue a series of finite delays between January and July 2017 before issuing an indefinite suspension in July 2017, and that "[g]ood cause cannot arise as a result of the agency's own delay[.]" Id. at 114. The NHTSA additionally argued that it suspended the effective date of the 2016 penalty rates because it needed more time to consider the responses it anticipated receiving to its announcement that it was reconsidering the rates. Id. at 115. The Second Circuit rejected this argument too, holding that "[t]his is not a situation of acute health or safety risk requiring immediate administrative
Another court in this district recently rejected an analogous attempt by an agency to forgo notice and comment under the APA by promulgating a rule to delay the effective date of certain regulations promulgated by the prior administration. Pineros y Campesinos, 293 F.Supp.3d 1062. In early January 2017, the EPA promulgated a rule strengthening regulations surrounding the certification and use of certain pesticides. Id. at 1063. The rule was to go into effect on March 6, 2017. Id. Beginning in late January 2017, the EPA reversed course and issued four successive delays of the rule. Id. at 1063-64. For one delay, the EPA provided four days for interested parties to provide comments; for the other three delays, the EPA provided no opportunity to comment. Id. at 1063 n.1. Farmworker unions and advocacy groups brought suit to challenge the delays. Id. at 1064.
The EPA argued that it had good cause to forgo notice-and-comment rulemaking for its delays because more time was needed for "further review and consideration of new regulations" and confusion could result if the pesticide rule went into effect "but was subsequently substantially revised or repealed." Id. at 1066-67 (quoting administrative record). The court rejected this argument on the ground that it did not satisfy the "extraordinarily narrow" good-cause exception, which "is reserved for situations where delay would do real harm." Id. at 1067 (citing Valverde, 628 F.3d at 1164-65). The court held that "[a] new administration's simple desire to have more time to review, and possibly revise or repeal, its predecessor's regulations falls short of this exacting standard," and it vacated the EPA's delay rules on the ground that they violated the APA. Id. (citing Clean Air Council, 862 F.3d at 9).
To counter Bauer, NRDC, and Pineros y Campesinos, the Department cites only one case to support its argument that it had good cause to forgo the HEA's statutory negotiated-rulemaking requirement: Oregon Trollers Association v. Gutierrez, No. Civ. 05-6165-TC, 2005 WL 2211084 (D. Or. Sept. 8, 2005) (Or. Trollers I), aff'd, 452 F.3d 1104 (9th Cir. 2006) (Or. Trollers II).
Oregon Trollers involved the Magnuson-Stevens Fishery Conservation and Management Act ("Magnuson Act"), an act passed in response to overfishing and inadequate conversation measures. Or. Trollers I, 2005 WL 2211084, at *1. The Magnuson Act called for "fishery management plans which will achieve and maintain, on a continuing basis, the optimum yield from each fishery." Id. (quoting 16 U.S.C. § 1801(b)(5)). The Magnuson Act also established "Regional Fishery Management Councils" to prepare, monitor, and revise fish-management plans in conjunction with the participation and advice of interested parties and consideration of the social and economic needs of the states. Id. (citing 16 U.S.C. § 1801(b)(5)).
At issue in Oregon Trollers was the Pacific Coast Salmon Fishery Management Plan, which governed Pacific Ocean salmon fisheries in the United States's exclusive economic zone. Id. at *2. Since 1989, the Plan required that annual fish-management measures provide that at least 35,000 naturally spawning adult Klamath River fall chinook salmon should "escape" being harvested to be able to spawn and produce new juvenile salmon. Id.
In 2004, the number of salmon that returned to the Klamath River to spawn was nearly 18,000 fish under original estimates. Id. Only 24,300 adult salmon returned to spawn in natural areas, over 10,000 fish below the 35,000 floor. Id. The number of "age-4" salmon that had been harvested from the ocean (i.e., the fish that had not "escaped" to spawn), which had been estimated to be 15% of the total "age-4" stock of fish — and which was subject under the Endangered Species Act ("ESA") to a limit of 16% — turned out instead to be 52.4% of the stock of fish. Id.
A technical team of eight state, federal, and Native American tribal salmon specialists and the Regional Council's staff economist met to develop a report summarizing the 2004 fishing season. Id. at *3 & n.12. The team's first report, issued in February 2005, stated that repeating the 2004 fish-management regulations in 2005 would likely again result in an escapement rate of less than 35,000 fish and an ocean-harvest rate that exceeded the 16% limit under the ESA. Id. The state and tribal agencies and the Klamath Fishery Management Council ("KFMC") — an advisory committee that included members of the commercial and recreational fishing communities, Native American tribes, and state and federal agencies — discussed the report with their respective constituents. Id. at *3 & n.14. The Regional Council met from March 6 to March 11, 2005, to prepare regulatory options for public review. Id. at *3. Following that meeting, the technical team issued its second report, analyzing four fish-management options and the socioeconomic impacts of each. Id.
On March 28 and 29, 2005, public hearings were held to review the proposed regulatory options and to allow for public comment. Id. After the hearings, the Regional Council met again from April 3 to April 8, 2005. Id. at *4. The Council invited additional public comment. Id. at *3 n.16. The Council heard reports from the KFMC, the NMFS, the Native American tribes, and the states. Id. at *4. On April 7, 2005, the Council adopted final regulatory measures to submit to the Secretary of Commerce. Id. The regulations were adopted as final regulations on May 4, 2005, and went into immediate effect. Id. (The public was allowed until May 19, 2005, to submit additional comments on the regulations. Id. at *4 n.17.)
The NMFS published a statement in the Federal Register why it was forgoing notice and comment under the APA. Id. at *13. It stated that "[t]he annual salmon management cycle begins on May 1 and continues through April 30 of the following year." Id. (quoting Fisheries Off West Coast States and in the Western Pacific; West Coast Salmon Fisheries; 2005 Management Measures, 70 Fed. Reg. 23,054, 23,063 (May 4, 2005)). "The May 1 date was chosen because pre-May harvests constitute a relatively small portion of the annual catch," whereas harvest levels beginning in May are "much more substantial." Id. (quoting 70 Fed. Reg. at 23,063). "The preseason planning and public review
The NMFS noted that it could not add those 30 to 60 days to the front end of this process, i.e., begin the planning and review process before February, because "preseason abundance forecasts, which are derived from the previous year's observed spawning escapement, vary substantially from year to year, and are not available until January and February because spawning escapement continues through the fall." Id. (quoting 70 Fed. Reg., at 23,063). And if it added those 30 to 60 days to the back end, fish management would have to continue to operate under the prior year's management plan for an additional 30 to 60 days, i.e., through May and June. See id. ("Delaying implementation of annual fishing regulations, which are based on the current stock abundance projections, for an additional 60 days would require that fishing regulations for May and June be set in the previous year without knowledge of the current stock status.") (quoting 70 Fed. Reg. at 23,063); see also 70 Fed. Reg. at 23,063 ("If [the new year's] measures are not in place on May 1, the previous year's management measures will continue to apply."). The NMFS stated that "[a]llowing the much more substantial harvest levels normally associated with the May and June seasons to be regulated [under the prior year's plan] would impair NMFS' ability to protect weak and ESA listed stocks and provide harvest opportunity where appropriate" and "could compromise the status of certain stocks" — and, conversely, could also "result in forgoing opportunity to harvest stocks whose abundance has increased relative to the previous year" — "thereby undermining the purpose of this agency action." Id. at *13-14 (quoting 70 Fed. Reg. at 23,063).
The district court found good cause for the NMFS's forgoing notice and comment under the APA, holding "the agency demonstrate[s] exigency which imperils its ability to fulfill its duties" and "points out specific reasons why the agency must invoke the APA exception in this year." Id. (emphasis in original). On appeal, the Ninth Circuit affirmed the district court's decision finding good cause for forgoing notice and comment. Or. Trollers II, 452 F.3d 1104. The Ninth Circuit first reaffirmed that generic timeliness considerations of rulemaking cannot constitute "good cause" under the APA. Id. at 1124 (citing NRDC v. Evans, 316 F.3d 904, 912 (9th Cir. 2003)). It held, however, that the NFMS had "justified its decision with specific fishery-related reasons, not generic complaints about time pressure and data collection deficiencies," and thus had shown good cause with respect to the particular 2005 regulations at issue. Id. at 1124-25.
The Department attempts to analogize the NMFS's decision to forgo notice and comment in Oregon Trollers to its decision to forgo negotiated rulemaking here. The situations are not comparable. The purpose of the Magnuson Act is to conserve and manage fishery resources, 16 U.S.C. § 1801, and in Oregon Trollers, the NMFS provided specific fishery-related reasons why it could not subject the 2005 fish-management
The situation here is also not comparable to the situation in Oregon Trollers because in Oregon Trollers, the time pressures the NMFS faced were driven entirely by external forces, namely, the nature of salmon, how soon the prior year's salmon escapement rate could be fully counted (not until January and February), and how soon the next year's salmon fishing season would begin in earnest (May or June). Here, the time pressures faced by the Department were of its own making. The Department claims that it was prompted to propose delaying the effective date of the Distance-Education Rules because the 2018 ACE Letter and the 2018 WCET Letter raised issues regarding the definition of the term "resides" as used in the Rules and regarding how the Rules would apply to states like California that did not have processes in place for reviewing student complaints about out-of-state institutions. Delay-Rule NPRM, 83 Fed. Reg. at 24,251. The Department does not explain why it took no action between February 2018 (when it received those Letters) and May 2018 (when it issued the Delay-Rule NPRM) to delay the Distance-Education Rules from going into effect. Nor does the Department explain why it took no action (1) after it announced in January 2017 that it intended to take action with respect to the Distance-Education Rules, 82 Fed. Reg. at 8669, (2) after it announced in June 2017 that it was convening negotiated-rulemaking committees to reconsider other regulations, 82 Fed. Reg. at 27,640, or (3) after it received the 2017 WCET letter in August 2017, which raised the same issues regarding the definition of the term "resides" and the applicability to California that the 2018 Letters raised and asked the Department for a timeline for when it would respond, 2017 WCET Letter at 3-5, 7. To the extent that the Department claims that it was under time pressure in May 2018 when it issued the Delay-Rule NPRM, that time pressure was due to its
The Department did not have good cause to forgo the negotiated-rulemaking requirements of 20 U.S.C. § 1098a(b)(2). Its desire to delay the Distance-Education Rules before the Rules went into effect did not constitute good cause. And as the Department did not meet the narrow good-cause exception in 5 U.S.C. § 553, it was required to submit its delay proposal to the negotiated-rulemaking process set out in 20 U.S.C. § 1098a(b)(2). Its failure to do so was error.
Section 706 of the APA provides that in reviewing agency action, "due account shall be taken of the rule of prejudicial error." 5 U.S.C. § 706; accord Cal. Wilderness Coal. v. U.S. Dep't of Energy, 631 F.3d 1072, 1090 (9th Cir. 2011) (citing Paulsen v. Daniels, 413 F.3d 999, 1006 (9th Cir. 2005)). The Ninth Circuit "has stressed, however, that a court `must exercise great caution in applying the harmless error rule in the administrative rulemaking context.'" Cal. Wilderness, 631 F.3d at 1090 (quoting Paulsen, 413 F.3d at 1006). The Ninth Circuit explained:
Id. (quoting Riverbend Farms, 958 F.2d at 1487).
The Department's decision to forgo negotiated rulemaking "had [a] bearing on the procedure used" to promulgate the Delay Rule. Under negotiated rulemaking, various groups and stakeholders would have had the opportunity to nominate individuals to participate in the negotiations process. 20 U.S.C. § 1098a(a)(1), (b)(1), (b)(2).
The Department's arguments do not change this outcome. The Department first claims that "[w]here the error is the failure to provide notice and comment, that error is considered harmless `only where the agency's mistake clearly had no bearing on the procedure used or the substance of decision reached,'" whereas "`[i]n other contexts, however, courts' review for harmless error is more demanding of plaintiffs,' such that plaintiffs must identify the harm they suffered as a result of the agency's error," quoting City of Sausalito v. O'Neill, 386 F.3d 1186, 1220 (9th Cir. 2004).
The Department next argues that forgoing negotiated rulemaking was harmless because in issuing its Delay-Rule NPRM, it "expressly invited comment on its proposed delay of the 2016 [Distance-Education] Rule[s]" and that "given the robust public participation — including, importantly, from the types of stakeholders whose input negotiated rulemaking is meant to solicit — in response to the 2018 NPRM, any error with the Department's decision to waive negotiated rulemaking was harmless."
The Ninth Circuit rejected a similar argument in California Wilderness, 631 F.3d 1072. The statute at issue there required
Id. at 1093 (emphasis in original). The Ninth Circuit held that "[t]he failure to consult was not some technical error, but resulted in a decisionmaking process that was contrary to that mandated by Congress and one that deprived DOE of timely substantive information. We conclude that DOE's failure to consult with the affected States, as directed by Congress, was not harmless error." Id. at 1095.
The Ninth Circuit's holding in California Wilderness applies here. Like "consultation," negotiated rulemaking allows stakeholders to provide input before the Department settles on a proposed rule. 20 U.S.C. § 1098a(b)(2). Additionally, a negotiated-rulemaking committee, if it reaches a consensus, can potentially bind the Department with respect to what rules the Department can propose, in a way that mere comments cannot. Id. The Department's offer of a seventeen-day period to comment on a proposed delay rule that the Department had already formulated was not an adequate substitute for this statutory negotiated-rulemaking process, and the Department's failure to offer the latter was not harmless error.
"`[W]hen a reviewing court determines that agency regulations are unlawful,
The presumptive remedy for the Department's improper promulgation of the Delay Rule is to vacate the Rule. The equities do not favor a departure from that presumptive remedy.
The Department nonetheless argues that "the failure to conduct negotiated rulemaking is not a serious error[.]"
The Department also argues that the court should refrain from vacating the Delay Rule because vacatur would result in "confusion" and would be "disruptive."
The Department did not have good cause to forgo negotiated rulemaking with respect to the Delay Rule, and its failure to engage in negotiated rulemaking was not harmless error. The court grants the plaintiffs' motion for summary judgment
The Department also cites Sagebrush Rebellion, Inc. v. Hodel, 790 F.2d 760 (9th Cir. 1986), a case that also is not analogous. In that case, the Department of the Interior issued a notice and invited comment on a proposal to create a conservation area in the Snake River Canyon by legislatively withdrawing the lands from mining laws but did not issue a separate notice on a proposal to administratively withdraw those same lands. Id. at 762, 764. The two withdrawals would have had "identical legal effect, with only one exception: whereas the congressional withdrawal would be in perpetuity (subject, of course, to Congress' inherent right to enact legislation to the contrary in the future), ... administrative withdrawals [are limited] to a maximum of twenty years, and [are] subject to congressional review and administrative revocation." Id. at 762. The Ninth Circuit held that the failure to issue a separate notice regarding administrative withdrawal was harmless given the notice and comment with respect to legislative withdrawal because "the impact of both actions on all concerned persons would be identical for a substantial period of time at least," and hence "the same public would have responded to a notice of administrative withdrawal as responded to the noticed congressional withdrawal[.]" Id. at 764. No analogous facts are present here.
