Update | Delay. Delay. Delay. The Department of Education Appeals Preliminary Injunction Order and Moves to Stay Litigation Pending Appeal: What it Means and What Happens Next?

August 2, 2018

On May 25, 2018, a federal court in San Francisco granted former Corinthian borrowers’ motion for a preliminary injunction in Calvillo Manriquez v. DeVosordering the Department of Education to stop using its “average rulings rule” immediately, and to stop collecting the loans of certain Corinthian borrowers. The judge found that the Department of Education had violated federal law by secretly and illegally using data from the Social Security Administration to partially deny individual borrower defense applications for thousands of Corinthian borrowers. On June 19, 2018, the Court clarified that that the order stops all collection efforts on all Direct Loans that are infected with Corinthian’s fraud. The Order will last until the Department proposes, and the Court approves, a new policy for loan relief.

On July 24, 2018, the Department informed the Court that it was appealing this decision to a higher court for review: the Ninth Circuit Court of Appeals. Two days later, the Department filed a motion requesting a “stay pending appeal.” In other words, they’re asking that the Judge hold off on any further litigation until the Circuit Court reviews the preliminary injunction order. We’ve opposed that request and are awaiting a decision from the Judge.

The Department’s decision to appeal and its attempts to delay this case harms the very borrowers it should be protecting. The Department’s violation of the law is clear and its only strategy is to try to delay this case. We hope that the Department will eventually come to its senses and cancel all Corinthian borrowers’ debt. Until then, we will highlight the Department’s unlawful conduct on appeal and attempt to move the litigation forward.

What is this case about?

Calvillo Manriquez v. DeVos is a class action filed in December 2017 challenging the Department of Education’s unexplained, irrational, and abrupt change of course with respected to former students of collapsed for-profit Corinthian Colleges. Under the Department of Education’s watch, Corinthian took in billions in taxpayer money and used boiler-room-style high-pressure tactics and racially-targeted advertising to build its business, all while producing outcomes for students so terrible that it had to lie about them. Corinthian filed bankruptcy and its debts disappeared, but the students it cheated were left thousands of dollars in debt for an education they never received.

After previously acknowledging that Corinthian’s widespread wrongdoing entitled at least some former students to complete cancellation of their federal student loans, the Department stopped granting any cancellation at all, and then used data from the Social Security Administration and announced that it would cancel only a portion of these bogus debts.

Who are the plaintiffs in this case?

 The proposed class in this case is Corinthian borrowers who are covered by Department of Education findings that Corinthian violated the law by lying to them about the chain’s job placement rates. As the Department already decided, because the company lied to get them to enroll, their loans are invalid and unenforceable. There are several named plaintiffs representing the class. Read about them here. You can also find out if you are a member of the class by clicking here.

What is an appeal?

The federal court system is made up of several different layers: trial courts that initially hear a case, a regional appellate court that reviews the trial court’s decision, and the U.S. Supreme Court. The preliminary injunction order in this case was issued by a trial court. The Department of Education has asked that the regional court of appeals that covers California (the Ninth Circuit Court of Appeals) review the trial court’s order on the preliminary injunction. A three-judge panel will review the decision on appeal and could take anywhere from 6-months to a year to do so. Once they issue their decision (either agreeing or disagreeing with the trial court Judge), the case will return to the trial court for further proceedings.

What is a stay of litigation pending appeal and does it impact the preliminary injunction?

A stay of litigation pending appeal stops the litigation from moving forward while the appeal is ongoing. A stay of litigation pending appeal will not impact the preliminary injunction order. Here, the Department has asked the Court to halt all further litigation until the appellate court weighs in, but it is still required to comply with the preliminary injunction order during the appeal.

What happens next?

At the trial court level, we’re going to fight to try to keep the case moving forward so that we can quickly resolve the case after the appeal is resolved. If we succeed, the court will decide whether Plaintiffs can pursue the matter as a class action and whether the Department has to turn over certain documents. If we don’t succeed, the litigation will be on hold pending the higher court’s decision on the preliminary injunction.

Regardless of what happens at the trial court, the appeal will move forward. On appeal, the Department will file its initial brief in early September, we’ll respond in early October, and the government will file a reply brief three weeks later. The Court will then set a hearing date and will issue a written opinion at any point after the oral argument.