Judge in ED Collection Litigation Reacts to OpEd and News Stories; Continues Preliminary Injunction Indefinitely

Yesterday, Chief Judge of the United States Court of Federal Claims, Susan G. Braden, issued an order continuing indefinitely the Preliminary Injunction in the litigation involving the Department of Education (ED) RFP for private collection agency (PCA) services. A copy of the order can be found here.

In the order Judge Braden points to three recent news articles (one of which was an Op/Ed piece) regarding ED and student loans.  She attached all three articles as exhibits to her order. 

The first referenced article was from POLITICO. It was published on May 25, 2017 with the headline: “GOP threatens to subpoena Education Dept. official who quit.” Judge Braden wrote: 

“On May 25, 2017, the court became aware of press reports indicating that James Runcie, Chief Operating Officer of the Office of Federal Student Aid, Department of Education, resigned rather than testify before the House Oversight Committee about approximately $3.86 billion in fiscal year 2016 that was erroneously paid under the Department of Education’s student loan program and approximately $2.21 billion in Pell grants.” 

The second article referenced in the order was an opinion piece by Persis Yu, published on May 22, 2017 in THE HILL. Persis Yu is the Director of National Consumer Law Center’s Student Loan Borrower Assistance Project. The headline for that opinion read: “Department of Education must end the billion-dollar student loan collection boondoggle.” Regarding that article, Judge Braden noted: 

“In addition, the court became aware of another recent press report, based on a Consumer Financial Protection Bureau Report, concluding that, “[t]he value added by the private collection agencies working for the Department of Education is highly questionable[,] but unquestionably expensive. Student loan borrowers deserve to understand their options and be set up for success. Taxpayers deserve to get their money’s worth.” 

Judge Braden then chastised all of the parties: 

“Neither of these relevant developments were brought to the attention of the court by the Department of Justice attorneys representing the Department of Education in the above captioned bid protest cases. Of course, none of the counsel of record for the private debt collection companies did so either, because these reports belie numerous representations to the court about the “so-called” harm to the student debtors and the public fisc from the preliminary injunction pending in this case.” 

Finally, Judge Braden discussed an article published on May 26, 2017 in the New York Times, “Trump Administration Considers Moving Student Loans from Education Department to Treasury.” Judge Braden wrote:

“In addition, on May 26, 2017, the New York Times published an article indicating that “the Administration is considering moving responsibility for overseeing more than $1 trillion in student debt from the Education Department to the Treasury Department.” If so, the bid protests before the court will become moot.” 

Judge Braden concluded the order with the following: 

“For these reasons, the preliminary injunction will remain in place to preserve the status quo until the viability of the debt collection contracts at issue is resolved. See Litton Sys., Inc. v. Sundstrand Corp., 750 F.2d 952, 961 (Fed. Cir. 1984) (“The function of preliminary injunctive relief is to preserve the status quo pending a determination of the action on the merits.)” 

insideARM Perspective

The ED RFP story continues to take unusual turns.  This order is most unusual.

First, the order was apparently issued sua sponte. The injunction was set to expire today. But, the order does not reference that it was issued in response to a motion from one of the parties.

Secondly, Rule 201 of the Federal Rules of Civil Procedure governs “Judicial Notice of Adjudicative Facts.” That rule reads as follows:

Rule 201. Judicial Notice of Adjudicative Facts

(a) Scope. This rule governs judicial notice of an adjudicative fact only, not a legislative fact.

(b) Kinds of Facts That May Be Judicially Noticed. The court may judicially notice a fact that is not subject to reasonable dispute because it:

(1) is generally known within the trial court’s territorial jurisdiction; or

(2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.

(c) Taking Notice. The court:

(1) may take judicial notice on its own; or

(2) must take judicial notice if a party requests it and the court is supplied with the necessary information.

(d) Timing. The court may take judicial notice at any stage of the proceeding.

While Judge Braden’s order does not use the term “Judicial Notice,” it is clear that she is taking the articles into account. She attached the articles as exhibits!  As to the article by Persis Yu of the National Consumer Law Center, it seems incredibly odd to consider an Op/Ed piece as something “whose accuracy cannot be reasonable questioned.” That article is, by its very nature, an OPINION. 

What does this order mean? For one, it prohibits ED from placing any new accounts, even to the small business contractors. However, it is not clear what, if anything, it means to the RFP process that was re-started last Friday. See our May 22, 2017 article on the “Do Over” here.  

The Preliminary Injunction remains in place “until the viability of the debt collection contracts at issue is resolved.” insideARM has no idea how what that means or how that issue can be resolved to Judge Braden’s satisfaction. 

Finally, Judge Braden didn’t mention this passage when referencing the NY Times article:  

“The Treasury Department recently conducted a pilot project in which its employees tried to collect on defaulted loans, a job the Education Department contracts out to private companies. 

The experiment, which began in mid-2015, did not end well.

The Treasury Department hoped to increase collection rates and help borrowers better understand their repayment options. It failed on both goals. A control group of private collectors recovered more money and got more borrowers out of default.”

For more information regarding that pilot program see this article from the U.S. Department of Treasury website.