Statement, Oakley et al. v. DeVos, No. 4:20-cv-03215 (N.D. Cal.), Doc. 42 (June 14, 2020)

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Plaintiffs' Statement Regarding Interim Final Rule, Document 42 in Oakley et al. v. DeVos, Case No. 20-cv-03215-YGR, in the U.S. District Court for the Northern District of California, Oakland Division, filed June 14, 2020. The statement responds to the Court's June 12 Order, ECF No. 40, which directs Plaintiffs to address the procedural, substantive, and timing impacts, if any, of Defendants' Interim Final Rule (IFR) publication on the pending motion for preliminary injunction. Plaintiffs argue that the IFR has no procedural impact on that motion, that it does nothing to diminish their legal claims, and that the Department's interpretation of the CARES Act is not entitled to deference. The signature blocks include /s/ Lee I. Sherman, Deputy Attorney General.

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“Statement, Oakley et al. v. DeVos, No. 4:20-cv-03215 (N.D. Cal.), Doc. 42 (June 14, 2020).” Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/statement-oakley-et-al-v-devos-no-4-20-cv-03215-n-d-cal-doc-42-june-14-853b436286/, SHA-256 8891497f5294038312a718c5300703b730540c0d846e1994e27346dfaac490c1.

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Case 4:20-cv-03215-YGR Document 42 Filed 06/14/20 Page 1 of 15

1 XAVIER BECERRA
Attorney General of California
2 CHERYL FEINER
MICHAEL NEWMAN
3 Senior Assistant Attorneys General
CHRISTINE CHUANG
4 Supervising Deputy Attorney General
JULIA HARUMI MASS
5 JASLEEN SINGH
SHUBHRA SHIVPURI
6 JOSHUA SONDHEIMER
LEE I. SHERMAN (SBN 272271)
7 Deputy Attorneys General
300 S. Spring St., Suite 1702
8 Los Angeles, CA 90013
Telephone: (213) 269-6404
9 Fax: (213) 897-7605
E-mail: Lee.Sherman@doj.ca.gov
10 Attorneys for Plaintiffs Eloy Ortiz Oakley and Board of
Governors of the California Community Colleges
11
(List of other Plaintiffs’ counsel continued on next page)
12

13 IN THE UNITED STATES DISTRICT COURT

14 FOR THE NORTHERN DISTRICT OF CALIFORNIA

15 OAKLAND DIVISION

16
ELOY ORTIZ OAKLEY, in his official Case No. 20-cv-03215-YGR
17 capacity as Chancellor of California
Community Colleges et al., PLAINTIFFS’ STATEMENT
18 REGARDING INTERIM FINAL RULE
Plaintiffs,
19 Judge: Honorable Yvonne Gonzalez
v. Rogers
20 Trial Date: None Set
Action Filed: May 11, 2020
21 BETSY DEVOS, in her official capacity as
the United States Secretary of Education;
22 U.S. DEPARTMENT OF EDUCATION,
23 Defendants.
24

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1 JOHN SHUPE
Lynch and Shupe, LLP
2 316 Mid Valley Center # 180
Carmel, CA 93923-8516
3 Telephone: (650) 579-5950
Fax: (650) 579-0300
4 E-mail: jshupe@lynchshupelaw.com
Attorney for Plaintiff Foothill-De Anza Community College District
5
JEFFREY M. PRIETO
6 General Counsel
Los Angeles Community College District
7 770 Wilshire Boulevard
Los Angeles, CA 90017
8 Telephone: (213) 891-2188
Fax: (213) 891-2138
9 E-mail: prietojm@laccd.edu
Attorney for Plaintiff Los Angeles Community College District
10
JP SHERRY
11 General Counsel
Los Rios Community College District
12 1919 Spanos Court
Sacramento, CA 95825
13 Telephone: (916) 568-3042
E-mail: sherryj@losrios.edu
14 Attorney for Plaintiff Los Rios Community College District
15 MATTHEW T. BESMER
General Counsel
16 State Center Community College District
1171 Fulton Street
17 Fresno, CA 93721
Telephone: (559) 243-7121
18 E-mail: matthew.besmer@scccd.edu
Attorney for Plaintiff State Center Community College District
19
LJUBISA KOSTIC
20 Director, Legal Services & EEO
San Diego Community College District
21 3375 Camino del Rio South, Room 385
San Diego, CA 92108
22 Telephone: (619) 388-6877
Fax: (619) 388-6898
23 E-mail: lkostic@sdccd.edu
Attorney for Plaintiff San Diego Community College District
24

Pls.’ Statement Re: Interim Final Rule (20-cv-03215-YGR)
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1 Plaintiffs file this Statement in response to the Court’s June 12 Order, ECF No. 40,
2 directing Plaintiffs to address the procedural, substantive, and timing impacts, if any, of
3 Defendants’ (DoE) forthcoming Interim Final Rule (IFR) publication, ECF No. 39-1, on
4 Plaintiffs’ pending motion for preliminary injunction, ECF No. 16 (PI Mot. or PI Motion). In
5 summary:
6  The IFR confirms that DoE has made a final determination that Title IV’s and 8 U.S.C.
7 § 1611’s (§ 1611) eligibility restrictions govern HEERF Assistance, reinforcing Plaintiffs’
8 need for urgent relief.
9  The IFR does nothing to diminish Plaintiffs’ legal claims and demonstrates that DoE’s
10 interpretation is not entitled to deference.
11  The IFR is essentially a repackaging of the arguments that DoE already offered to the
12 Court in its Opposition brief (Opposition or Opp’n), ECF No. 20, and at the June 9
13 hearing, and provides the Court with further grounds for finding the eligibility restrictions
14 on HEERF Assistance to be arbitrary and capricious.
15 Plaintiffs also note the federal district court for the Eastern District of Washington, after
16 considering the IFR, preliminarily enjoined DoE’s imposition of Title IV’s eligibility restrictions
17 on HEERF Assistance in Washington State without additional briefing. Order Granting Pl.’s Mot.
18 for Prelim. Inj., Washington v. DeVos, No. 20-cv-00182-TOR (E.D. Wash. June 12, 2020), ECF
19 No. 31 (Washington PI Order) (filed in this case as ECF No. 41-1). Plaintiffs are prepared to
20 promptly address any issues the Court requests but submit that further briefing is unnecessary and
21 that postponing resolution of Plaintiffs’ request for preliminary relief will compound the
22 irreparable harm that Plaintiffs and their students have already suffered as a result of DoE’s
23 unlawful actions.
24 I. PROCEDURAL IMPACT
25 The IFR has no procedural impact on Plaintiffs’ pending PI Motion, irrespective of the
26 mechanism by which DoE imposes the eligibility restrictions on HEERF Assistance. Plaintiffs’
27 Complaint alleges that DoE’s imposition of any eligibility restrictions on HEERF Assistance is
28 unlawful and unconstitutional. See, e.g., Compl. ¶¶ 5-6 (May 11, 2020), ECF No. 1. The Prayer
1
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1 for Relief seeks to enjoin the imposition and enforcement of eligibility restrictions on HEERF
2 Assistance, whether or not set forth in DoE’s guidances. See, e.g., id. Prayer for Relief No. 3
3 (seeking an injunction against “imposing and enforcing the eligibility requirements identified in
4 the April 21 HEERF Assistance Guidances or otherwise restricting eligibility for HEERF
5 Assistance to only those who are eligible under Title IV of the Higher Education Act of 1965”)
6 (emphasis added). The PI Motion likewise argues that the CARES Act does not impose eligibility
7 restrictions on HEERF Assistance, nor does it delegate authority to the DoE Secretary to do so,
8 see PI Mot. 12-17, and Plaintiffs’ proposed order requests that DoE be enjoined from “[i]mposing
9 or enforcing any eligibility requirement for students to receive [HEERF Assistance]. . . .”
10 [Proposed] Order Granting Pls.’ Mot. for Prelim. Inj. 1 (May 13, 2020), ECF No. 16-1 (emphasis
11 added). The IFR contains the same eligibility restrictions as previously imposed by DoE and thus
12 harms the Plaintiffs in the “same fundamental way.” Massachusetts v. HHS, 923 F.3d 209, 220
13 (1st Cir. 2019) (quoting Ne. Fla. Chapter of the Associated Gen. Contractors of Am. v. City of
14 Jacksonville, 508 U.S. 656, 662 (1993)) (substantive challenges to interim final rule were not
15 rendered moot when final rules were published during the course of litigation and where the final
16 rules are “sufficiently similar” to the challenged interim final rules); see also Cuviello v. City of
17 Vallejo, 944 F.3d 816, 824-25 (9th Cir. 2019) (challenge to an ordinance is not mooted by an
18 amendment to the ordinance when the “gravamen of [plaintiff’s] complaint and the irreparable
19 harm that [plaintiff] alleges remain unaffected by the amendments;” the court is “particularly
20 wary of legislative changes made in direct response to litigation”).1
21 In addition, the IFR confirms that DoE’s eligibility restrictions on HEERF Assistance are
22 binding on Plaintiffs, see IFR 20, and the IFR constitutes a final agency action that is ripe for
23 review. See Public Citizen v. DOT, 316 F.3d 1002, 1019 (9th Cir. 2003), rev’d on other grounds,
24 541 U.S. 752 (2004); Beverly Enters. v. Herman, 50 F. Supp. 2d 7, 17 (D.D.C. 1999) (concluding
25 interim final rule was final agency action subject to challenge under the APA); see also Nat. Res.
26
1
There are other grounds that the IFR is unlawful that are not raised in Plaintiffs’ Complaint or PI
27 Motion, including that it violates the Regulatory Flexibility Act, 5 U.S.C. §§ 601-12. Because
those claims were not raised in Plaintiffs’ Complaint or PI Motion, Plaintiffs do not raise them
28 here, but reserve their right to challenge the IFR on those grounds.
2
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1 Def. Council v. EPA, 966 F.2d 1292, 1299 (9th Cir. 1992) (“[A]n agency action is ripe for review
2 if the action at issue is final and the questions involved are legal ones.”).
3 II. SUBSTANTIVE IMPACT
4 The IFR only further supports Plaintiffs’ existing arguments that DoE’s imposition of
5 HEERF eligibility restrictions: (a) violate the separation of powers; (b) are ultra vires; (c) are in
6 excess of statutory authority and arbitrary and capricious in violation of the APA; and (d) violate
7 the Spending Clause. The IFR relies on substantive arguments Defendants offered in their
8 briefing and which Plaintiffs have already addressed. While the IFR provides additional grounds
9 for finding the eligibility restrictions arbitrary and capricious, the Court may find that Plaintiffs
10 are likely to succeed on all of their claims and that preliminary relief is warranted without
11 addressing the new grounds for finding the IFR arbitrary and capricious at this stage of the
12 litigation.
13 A. DoE’s Interpretation of the CARES Act in the IFR is Not Entitled to
Deference
14

15 The IFR provides no new basis for affording deference to the agency’s position, and the
16 IFR’s claim of deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837
17 (1984), is misplaced. IFR 7. “To determine whether the Chevron framework governs at all . . .
18 there is a threshold ‘step zero’ inquiry in which we ask whether ‘it appears that Congress
19 delegated authority to the agency generally to make rules carrying the force of law, and [whether]
20 the agency interpretation claiming deference was promulgated in the exercise of that authority.’”
21 Sierra Club v. Trump, 929 F.3d 670, 692 (9th Cir. 2019) (quoting United States v. Mead Corp.,
22 533 U.S. 218, 226-27 (2001)) (alteration in original). As Plaintiffs argued in their reply brief
23 (Reply), ECF No. 21, the CARES Act did not delegate authority to the DoE Secretary to
24 promulgate HEERF eligibility criteria. Reply 6. The IFR does not identify any delegation from
25 Congress to issue rules arising from the CARES Act itself. Instead, the IFR invokes 20 U.S.C.
26 §§ 1221e-3 and 3474 as the statutory authority for issuing the IFR on HEERF eligibility criteria.
27 IFR 7. These provisions only authorize the DoE Secretary to issue rules in connection with her
28 functions. See 20 U.S.C. §§ 1221e-3 (authorizing rules “to carry out functions otherwise vested in
3
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1 the Secretary by law or by delegation of authority pursuant to law”), 3474 (authorizing Secretary
2 “to prescribe such rules and regulations as the Secretary determines necessary or appropriate to
3 administer and manage functions of the Secretary or the Department”).
4 Such authority for regulating administrative functions does not authorize the imposition of
5 substantive eligibility requirements or funding conditions. Reply 6 n.5; see Gonzalez v. Oregon,
6 546 U.S. 243, 259, 264-65 (2006) (statute authorizing the Attorney General to promulgate rules
7 “for the efficient execution of his functions” under the Controlled Substance Act do not authorize
8 a rule that substantively altered medical standards for the care and treatment of patients; “[w]hen
9 Congress chooses to delegate a power of this extent, it does so not by referring back to the
10 administrator’s functions but by giving authority over the provisions of the statute he is to
11 interpret”); City of Chicago v. Sessions, 888 F.3d 272, 287 (7th Cir. 2018) (imposing grant
12 conditions “is a tremendous power of widespread impact” and “not the type of authority that
13 would be hidden in a clause without any explanation, and without any reference or
14 acknowledgement of that authority in the statute that actually contains the grant itself”).
15 Moreover, when Congress has previously authorized the DoE Secretary to impose funding
16 conditions or set eligibility criteria for a program, it has done so explicitly. PI Mot. 14. No
17 authorization or delegation for imposing funding conditions or setting eligibility criteria for
18 HEERF Assistance is present in the CARES Act. Hence, there is no delegation and Chevron is
19 inapplicable. See Gonzalez, 546 U.S. at 258, 268 (Chevron deference not warranted where statute
20 did “not give the Attorney General authority to issue the Interpretive Rule as a statement with the
21 force of law”).
22 Even if Chevron were applicable, DoE’s position does not warrant deference. Under
23 Chevron step one, courts first look to the intent of Congress to determine whether “the statute is
24 silent or ambiguous with respect to the specific issue.” Chevron, 467 U.S. at 843. “If the intent of
25 Congress is clear, that is the end of the matter; for the court, as well as the agency must give
26 effect to the unambiguously expressed intent of Congress.” Id. at 842-43; see also Freeman v.
27 Gonzales, 444 F.3d 1031, 1043 (9th Cir. 2006) (an agency rule that is “contrary to congressional
28 intent and frustrate[s] congressional policy” is not entitled to deference) (quoting Akhtar v.
4
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1 Burzynski, 384 F.3d 1193, 1202 (9th Cir. 2004)).
2 The IFR states that DoE’s interpretation was based on its “conclu[sion] that Congress
3 intended the category of those eligible for ‘emergency financial aid grants to students’ in section
4 18004 of the CARES Act to be limited to those individuals eligible for title IV assistance.” IFR 8.
5 Similarly, the DoE Secretary previously said that the eligibility restrictions were based on DoE
6 “following the law” written by Congress. RJN Ex. I. As such, the issue here is “a pure question of
7 statutory construction for the courts to decide” without deference to the agency’s interpretation.
8 INS v. Cardoza-Fonseca, 480 U.S. 421, 446 (1987); see also Chevron, 467 U.S. at 843 n.9 (“The
9 judiciary is the final authority on issues of statutory construction . . . If a court, employing
10 traditional tools of statutory construction, ascertains that Congress had an intention on the precise
11 question at issue, that intention is the law and must be given effect.”).
12 Furthermore, as discussed in Plaintiffs’ prior briefing, Congress’s intent in the CARES Act
13 is clear: higher education institutions are permitted to distribute HEERF Assistance without any
14 eligibility limitations. PI Mot. 12-17; Reply 5-12. There are no “ambiguous” terms for the agency
15 to interpret. Under normal rules of statutory construction, the term “students” in subsection (c) of
16 § 18004 governing HEERF Student Assistance must have the same meaning as the term
17 “students” used in subsection (a)(1)(B) governing the funding formula, which includes students
18 who are not eligible under Title IV or § 1611. Reply 9. The IFR omits any recognition that the
19 formula mandated by Congress in subsection (a)(1)(B) encompasses all students (not exclusively
20 enrolled in online learning at the start of the pandemic). See IFR 14 n.2 (discussing DoE’s
21 calculation of the HEERF allocation without acknowledging that Congress required that DoE
22 account for all of these students); see also Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338,
23 361 (2013) (agency manual was not entitled to even Skidmore deference where agency “fail[ed]
24 to address the specific provisions of the statutory scheme” relevant to the statute’s interpretation).
25 Even if there were ambiguities in the CARES Act that resulted in reaching Chevron “step
26 two,” as discussed previously and below, DoE’s interpretation is not “based on a permissible
27 construction of the statute.” Chevron, 467 U.S. at 843. Finally, DoE is not entitled to deference in
28 addressing any ambiguities resulting in the imposition of a funding condition not unambiguously
5
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1 authorized by Congress. Reply 13 (citing Va. Dep’t of Educ. v. Riley, 106 F.3d 559, 567 (4th Cir.
2 1997)).
3 B. The IFR Provides No Persuasive Justification for Imposing Eligibility
Restrictions on HEERF Assistance
4

5 The IFR restates many of the arguments that DoE made in its Opposition to justify the
6 imposition of Title IV’s and § 1611’s eligibility restrictions on HEERF Assistance. Compare
7 Opp’n 13-19 with IFR 6-14. The IFR acknowledges that the “emergency financial aid grants” a
8 part of HEERF Assistance “by definition, do not constitute Federal financial student aid under the
9 HEA, including title IV of the HEA.” IFR 11. This necessarily means that HEERF Assistance
10 cannot be subject to Title IV’s restrictions because Title IV’s eligibility restrictions only apply to
11 grants “under” Title IV. 20 U.S.C. § 1091(a); Reply 6. The IFR’s discussion that grants
12 authorized by 20 U.S.C. § 1138(d) are subject to Title IV’s eligibility restrictions only further
13 supports that Title IV’s restrictions do not apply to HEERF. IFR 11. In 20 U.S.C. § 1138(d),
14 Congress explicitly incorporated Title IV’s eligibility requirements by providing that “students
15 who do not meet the requirements of section 1091(a) of this title” are ineligible for that funding
16 source. No such language appears in § 18004 of the CARES Act.
17 DoE reiterates in the IFR the argument that the term “emergency financial aid grants” in
18 § 18004 of the CARES Act must have the same meaning as the use of “emergency financial aid
19 grants” in § 3504, which explicitly authorizes higher education institutions to use their “allocation
20 under . . . Title IV” (emphasis added) to provide emergency financial aid grants to students.
21 Opp’n 18; IFR 10-11. As the Eastern District of Washington court determined, the IFR fails to
22 recognize that “Section 3504 authorizes the reallocation of funds that have already been awarded
23 under Title IV and are clearly subject to Title IV restrictions” while “Section 18004 selectively
24 incorporates certain Title IV definitions in a manner that does not indicate an intent to subject
25 HERRF funds to Title IV restrictions.” Washington PI Order 27; see also PI Mot. 13.
26 The IFR’s discussion of other instances in which the CARES Act incorporates certain
27 elements of Title IV repeats the arguments DoE made in its Opposition and does not address key
28 principles of statutory construction. Compare IFR 11-13 with Opp’n 18-19. As Plaintiffs
6
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1 previously argued, “Congress’s incorporation of some elements of Title IV with ‘surgical
2 precision,’ but not Title IV’s eligibility requirements, demonstrates that Congress consciously
3 declined to adopt such requirements for HEERF Assistance.” Reply 7 (quoting Navajo Nation v.
4 HHS, 325 F.3d 1133, 1139-40 (9th Cir. 2003)).
5 Finally, the IFR provides no explanation for the application of § 1611’s eligibility
6 restrictions on HEERF Assistance beyond that made in DoE’s Opposition. Compare IFR 8-9 with
7 Opp’n 13-15. For the reasons detailed in Plaintiffs’ reply (at 8-12), the more specific one-time
8 emergency disbursement of HEERF Assistance in the CARES Act is not subject to the general
9 prohibition in § 1611, particularly where § 1611’s purposes are not furthered by its application to
10 HEERF.2
11 C. The IFR Further Demonstrates that DoE’s Eligibility Restrictions on
HEERF Assistance Are Arbitrary and Capricious
12

13 The IFR does not cure DoE’s arbitrary and capricious action, and Plaintiffs have
14 demonstrated a likelihood of success on this claim based on the existing briefing. As Plaintiffs
15 have explained, DoE first told higher education institutions they could provide HEERF
16 Assistance to “all students,” RJN Ex. D, and then “failed even to acknowledge its change in
17 position regarding the HEERF Eligibility Requirements, much less provide a ‘reasoned
18 explanation.’” PI Mot. 17 (quoting FCC v. Fox Television Stations, Inc., 556 U.S. 502, 516
19 (2009)). DoE’s Title IV and § 1611 eligibility restrictions contradict that prior statement, and the
20 IFR reflects no recognition of DoE’s prior position that all students are eligible to receive HEERF
21 Assistance.
22 The IFR also exacerbates, rather than resolves, the internal inconsistencies in DoE’s
23 agency action. PI Mot. 18. The IFR recognizes that the CARES Act emergency assistance grants
24
2
The Washington district court found plaintiff’s argument that § 1611 does not apply to HEERF
25 to be “reasonable and compelling” but that “Plaintiff has not shown that it is likely to succeed on
its argument.” Washington PI Order 21. The court’s reasoning in reaching that conclusion,
26 however, does not evidence any consideration of Plaintiffs’ arguments here that: (a) the specific
provisions of the CARES Act control over the general prohibition in § 1611; (b) the purposes of
27 the CARES Act and § 1611 demonstrate that § 1611’s eligibility restrictions are not applicable to
HEERF Assistance; and (c) HEERF Assistance is not a federal public benefit under § 1611.
28 Reply 8-11.
7
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1 “by definition, do not constitute Federal financial student aid under the HEA, including title IV of
2 the HEA.” IFR 11 (emphasis added). Yet the IFR applies Title IV eligibility restrictions without
3 explanation other than to say that a different funding source, authorized in 20 U.S.C. § 1138(d), is
4 subject to Title IV’s eligibility restrictions. Id. As already noted, supra 6, Congress explicitly
5 incorporated Title IV’s eligibility restrictions for that funding source and did not do so for
6 HEERF Assistance, thus leaving that internal inconsistency unexplained. In addition, DoE
7 continues to try to have it both ways: while the IFR first disavows Title IV’s requirements with
8 respect to certain procedural requirements under section 482 and 492 of HEA because “the rule
9 does not relate to the delivery of student aid funds under title IV” and “implements the CARES
10 Act, not title IV,” IFR 21, the IFR then singles out student relief as subject to Title IV’s eligibility
11 requirements, id. at 8.
12 The IFR does nothing to undercut Plaintiffs’ additional arguments that DoE’s eligibility
13 restrictions are arbitrary and capricious because DoE “relied on factors which Congress has not
14 intended it to consider, entirely failed to consider an important aspect of the problem,” and
15 “offered an explanation for its decision that runs counter to the evidence before the agency.” PI
16 Mot. 19 (quoting Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463
17 U.S. 29, 43 (1983)). By imposing eligibility restrictions on HEERF Assistance, the IFR relies on
18 factors that Congress did not intend, which the DoE Secretary previously acknowledged stating
19 that “the only statutory requirement is that funds be used to cover expenses related to the
20 disruption of campus operations due to coronavirus.” RJN Ex. D. Separately, the IFR’s
21 explanation of the inconsistency between the formula for allocating funds and the HEERF
22 eligibility restrictions, IFR 14 n.2, ignores the congressional command that the Secretary “shall”
23 distribute funds in accordance with the formula created by Congress, which accounts for all
24 students not previously enrolled in online education, § 18004(a)(1)(B), 134 Stat. 281, 567.
25 Based on the existing briefing, these aforementioned grounds are sufficient for finding
26 that Plaintiffs are likely to succeed on their arbitrary and capricious claim. The IFR’s policy
27 justifications for imposing eligibility requirements on HEERF Assistance only provide further
28 bases for setting aside the agency action as arbitrary and capricious. Among the new independent
8
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1 grounds that Plaintiffs would address on briefing for final judgment are the following:
2  The IFR states that existing Title IV eligibility standards provide higher education
3 institutions with clarity, and that “using a generic, broad standard” would instead require
4 DoE and institutions to “wade through a litany of specific questions” to determine
5 eligibility. IFR 16. But there is no evidence in the IFR to support that determination, and
6 evidence submitted by Plaintiff Districts evinces the contrary. See generally App’x of
7 Decls., ECF No. 16-4. The IFR ignores the obvious alternative of providing institutions
8 with discretion to use HEERF Assistance without the contested eligibility restrictions, as
9 originally allowed in the April 9 letter. RJN Ex. D; see State Farm, 463 U.S. at 48
10 (alternative way of achieving the objectives of the statute should have been addressed and
11 adequate reasons given for its abandonment).
12  The IFR asserts that the Title IV eligibility requirements are necessary to avoid “waste,
13 fraud, and abuse,” because without such eligibility requirements, individuals who were
14 not “qualified” would be “incentivize[d]” to enroll as students and institutions would
15 “take advantage of this dynamic to further their bottom line.” IFR 17-18. That rationale
16 fails to consider facts before the agency that HEERF Assistance is intended for students
17 already enrolled at the time of passage, including those students who may have become
18 ineligible for Title IV because of circumstances borne out of the pandemic (e.g., ability to
19 maintain Satisfactory Academic Progress).
20  The IFR’s analysis of the costs of the agency’s actions is cursory and inadequate as it fails
21 to consider: (a) the costs of the eligibility exclusions against the purported benefit of the
22 IFR; and (b) the impact on the other categories of students excluded due to the Title IV
23 eligibility requirements. See, e.g., IFR 30; see also State Farm, 463 U.S. at 52, 54
24 (“reasoned decisionmaking” requires agencies to “look at the costs as well as the benefits”
25 of their actions); Gresham v. Azar, 950 F.3d at 93, 103 (D.C. Cir. 2020) (HHS’s approval
26 of State Medicaid work requirements held arbitrary and capricious where it failed to
27 adequately consider the loss in coverage that would result, undermining foundational
28 statutory purpose). The primary benefit the IFR attributes to employing the Title IV
9
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1 eligibility requirements is the efficiency gained by using the existing FAFSA process. See
2 IFR 17, 29-30. But the IFR then provides that students may be permitted to fill out an
3 application that must be created by each institution, in which students certify their
4 eligibility under Title IV in lieu of completing a FAFSA. Id. at 30. If such self-
5 certification applications are sufficient, the FAFSA process is unnecessary, negating
6 DoE’s justification for imposing the Title IV eligibility requirements.
7  The IFR further disregards or underestimates the burdens imposed on higher education
8 institutions. See Michigan v. EPA, 135 S.Ct. 2699, 2712 (2015) (EPA’s actions held
9 unreasonable when it disregarded costs relevant to its decision to regulate power plants).
10 The IFR makes no mention of the harm to diversity and inclusion that results from
11 excluding students based on Title IV’s and § 1611’s requirements. See PI Mot. 6-11. It
12 also significantly underestimates the amount of time institutions will need to administer
13 DoE’s eligibility requirements, which entails navigating a complex FAFSA process or
14 verifying eligibility for students who self-certify. IFR 17 n.5, 30, 41 (estimating five hours
15 per institution to implement Title IV eligibility requirement); see Nat’l Ass’n of Home
16 Builders v. EPA, 682 F.3d 1032, 1040 (D.C. Cir. 2012) (“When an agency decides to rely
17 on a cost-benefit analysis as part of its rulemaking, a serious flaw undermining that
18 analysis can render the rule unreasonable.”).
19 For purposes of final judgment, Plaintiffs submit that additional briefing on these further
20 arbitrary and capricious arguments is warranted, but none is necessary for the Court to grant
21 preliminary relief on the already-briefed arbitrary and capricious grounds, or on the basis of
22 Plaintiffs’ other legal claims.
23 D. The IFR Further Demonstrates that DoE’s Eligibility Restrictions Violate
the Spending Clause
24

25 The IFR reinforces Plaintiffs’ Spending Clause claim as the IFR relies on the purported
26 “ambiguous” terms of the CARES Act to impose eligibility restrictions on HEERF Assistance.
27 See IFR 7. As Plaintiffs argued previously, “[t]his concession is fatal to the restrictions because
28 when ‘Congress intends to impose a condition on the grant of federal moneys, it must do so
10
Pls.’ Statement Re: Interim Final Rule (20-cv-03215-YGR)
Case 4:20-cv-03215-YGR Document 42 Filed 06/14/20 Page 13 of 15

1 unambiguously.’” Reply 13 (quoting Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17
2 (1981)). Independently, the eligibility restrictions violate the Spending Clause’s prohibition on
3 post-acceptance conditions, which the IFR does not (and cannot) change. PI Mot. 20-21; Reply
4 14. The IFR also creates a new Spending Clause ambiguity. Previously, Defendants argued that
5 the HEERF Institution Assistance portion of funds is not subject to Title IV’s eligibility
6 limitations, even if the institution uses a portion of those funds to make monetary payments to
7 students. Opp’n 7. The IFR, however, does not include any language allowing higher education
8 institutions to use HEERF Institution Assistance for non-Title IV eligible students. As such,
9 institutions are now in even less of a position “to exercise their choice knowingly, cognizant of
10 the consequences of their participation” in HEERF Assistance. Pennhurst, 451 U.S. at 17; see
11 also PI Mot. 20; Reply 13.
12 III. TIMING CONSIDERATIONS
13 Plaintiffs respectfully submit that additional briefing is unnecessary at this stage and urge
14 the Court to rule on Plaintiffs’ PI Motion as soon as possible to address the needs of Plaintiffs and
15 approximately 800,000 California community college students who are suffering irreparable harm
16 as a result of DoE’s HEERF eligibility restrictions. PI Mot. 22-25; Reply 14-15. Although
17 similarly-situated federal agencies have issued 24 Interim Final Rules implementing provisions of
18 the CARES Act since April 13, ECF No. 38, DoE waited until June 11, 2020, after the hearing on
19 Plaintiffs’ PI Motion, to issue an IFR that only confirms what was clear on April 21, 2020: DoE
20 has unlawfully imposed eligibility restrictions on HEERF Assistance. The question of whether
21 Title IV’s and § 1611’s eligibility restrictions apply to HEERF Assistance has been extensively
22 briefed and argued, and the IFR retreads arguments Defendants have already made in this case.
23 While Plaintiffs remain ready to promptly address any issues at the Court’s request, Plaintiffs
24 submit that no further briefing is necessary. Because of the students’ urgent and ongoing need for
25 emergency assistance to address the disruptions caused by the COVID-19 pandemic, the equities
26 strongly favor the issuance of a decision on Plaintiffs’ PI Motion.
27

28
11
Pls.’ Statement Re: Interim Final Rule (20-cv-03215-YGR)
Case 4:20-cv-03215-YGR Document 42 Filed 06/14/20 Page 14 of 15

1 Dated: June 14, 2020 Respectfully Submitted,
2 XAVIER BECERRA
Attorney General of California
3 CHERYL FEINER
MICHAEL NEWMAN
4 Senior Assistant Attorneys General
CHRISTINE CHUANG
5 Supervising Deputy Attorney General
JULIA HARUMI MASS
6 JASLEEN SINGH
SHUBHRA SHIVPURI
7 JOSHUA SONDHEIMER
8 /s/ Lee I. Sherman
9 LEE I. SHERMAN
Deputy Attorneys General
10 Attorneys for Plaintiffs Eloy Ortiz Oakley
and Board of Governors of the California
11 Community Colleges
12 /s/ JP Sherry
/s/ John Shupe
13 JP SHERRY
JOHN SHUPE
14 Lynch and Shupe, LLP General Counsel
Attorney for Plaintiff Foothill-De Anza Attorney for Plaintiff Los Rios
15 Community College District Community College District

16 /s/ Jeffrey M. Prieto /s/ Matthew T. Besmer
17 MATTHEW T. BESMER
JEFFREY M. PRIETO
18 General Counsel General Counsel
Attorney for Plaintiff Los Angeles Attorney for Plaintiff State Center
19 Community College District Community College District

20 /s/ Ljubisa Kostic
21 LJUBISA KOSTIC
Director, Legal Services & EEO
22 Attorney for Plaintiff San Diego
Community College District
23

28
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Pls.’ Statement Re: Interim Final Rule (20-cv-03215-YGR)
Case 4:20-cv-03215-YGR Document 42 Filed 06/14/20 Page 15 of 15

1 ATTESTATION OF SIGNATURES
2 I, Lee I. Sherman, hereby attest, pursuant to Local Civil Rule 5-1(i)(3) of the Northern
3 District of California that concurrence in the filing of this document has been obtained from each
4 signatory hereto.
5
/s/ Lee I. Sherman
6
LEE I. SHERMAN
7 Deputy Attorney General
Attorney for Plaintiffs Eloy Ortiz
8 Oakley and Board of Governors of
the California Community Colleges
9

28
13
Pls.’ Statement Re: Interim Final Rule (20-cv-03215-YGR)

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