Sweet v. Cardona

Docket number: 23-15049 (9th Cir.)

On May 10, HLLI filed an amicus brief on behalf of three colleges appealing the district court’s approval of a collusive class action settlement that skirts statutory limits. The underlying settlement was struck between the U.S. Department of Education and a plaintiff class of student borrowers seeking relief from federal student loan payments under the borrower-defense statute, 20 U.S.C. 1087e(h), and accompanying regulations.

HLLI’s brief notes that the district court rejected an earlier settlement negotiated under the prior administration. This gave the parties an opening to negotiate a new settlement that amounts to legislation disguised as a judicial settlement and helped the Biden administration achieve the political goal of broad student debt relief. HLLI’s brief emphasizes that the settlement has no statutory or regulatory basis. Moreover, the revised settlement fails to meet the class certification prerequisites of Rule23(a) and (b)(2) of the Federal Rules of Civil Procedure because, unlike the original settlement, the revised version creates three-subclasses with divergent claims who are accorded divergent relief, and thereby could not be certified as a unified class. Finally, HLLI’s brief highlights Constitutional separation of powers concerns related to the settlement. The Secretary of Education failed to faithfully follow the law and relevant regulations in negotiating the settlement which infringes upon Congress’s power of the purse. Rather than approving the settlement, the district court should have acted as a check on the Executive branch’s unlawful actions.

On November 5, the Ninth Circuit ruled 2-1 that three colleges did not have prudential standing to intervene in the case appealing the district court’s approval of a collusive class action settlement that skirted statutory limits. The ruling thereby affirmed the district court’s approval of the underlying revised settlement that was struck between the U.S. Department of Education and a plaintiff class of student borrowers seeking relief from federal student loan payments under the borrower-defense statute, 20 U.S.C. 1087e(h), and accompanying regulations. HLLI had filed an amicus brief in support of the three colleges challenging the collusive settlement.

Judge Daniel Collins issued a dissent in which he agreed with several of the points HLLI’s amicus brief emphasized. Judge Collins believed that the intervenor colleges had prudential standing to challenge the settlement. Moreover, he agreed with HLLI that the settlement had no statutory or regulatory basis and that it failed to meet the class certification prerequisites of Rule23(a) and (b)(2) of the Federal Rules of Civil Procedure because, unlike an initial settlement agreement inthe case, the revised version created three-subclasses with divergent claims who are accorded divergent relief, and thereby could not be certified as a unified class.

Case Documents