In re DeVos

540 F.Supp.3d 912

IN RE Subpoena Served on Former Secretary of Education Elisabeth DEVOS.

No. MC 21-80075 WHA

United States District Court, N.D. California.

Signed May 19, 2021

Claire L. Torchiana, Joseph E. Jaramillo, Housing and Economic Rights Advocates, Oakland, CA, Manuel Juan Dominguez, Cohen Milstein Sellers & Toll, Palm Beach Gardens, FL, Margaret O'Grady, Pro Hac Vice, Rebecca Ellis, Pro Hac Vice, Project on Predatory Student Lending of the Legal Services C, Rebecca C. Ellis, Pro Hac Vice, Legal Services Center of Harvard Law School, Jamaica Plain, MA, Margaret E. O'Grady, Pro Hac Vice, Legal Services Center of Harvard Law School, Boston, MA, for Theresa Sweet, Alicia Davis, Tresa Apodaca, Chenelle Archibald, Jessica Deegan, Samuel Hood, Jessica Jacobson.

Margaret E. O'Grady, Pro Hac Vice, Legal Services Center of Harvard Law School, Boston, MA, for Elisabeth DeVos.

Charlie R. Merritt, U.S Department of Justice, Kevin Hancock, DOJ, Civil Division, Washington, DC, R. Charlie Merritt, United States Department of Justice, Civil Division, Chicago, IL, for The Secretary of the United States Department of Education, The United States Department of Education.

ORDER DENYING MOTION TO QUASH

WILLIAM ALSUP, United States District Judge

Former Secretary of the United States Department of Education Elisabeth DeVos^* moves to quash a subpoena for her deposition, issued in co-pending litigation before the undersigned. Exceptional circumstances warranting the deposition, the motion is DENIED .

Our underlying suit, Sweet v. Cardona , No. C 19-03674 WHA, concerns the lawfulness of the Department of Education's eighteen-month halt in issuing decisions on student-loan borrower-defense applications under Secretary DeVos. Our story began in 1993 when Congress directed the Secretary of Education to specify the sort of school misconduct that borrowers may assert as a defense against repayment of their student loans. This "borrower-defense" apparatus lay dormant for its first several decades until May 2015 when the large for-profit college, Corinthian Colleges, Inc., collapsed. Students submitted a "flood" of borrower-defense applications, so Secretary John B. King appointed a special master in June 2015 to adjudicate claims and then updated the borrower-defense regulations in November 2016. But it remained a game of catch up. By the end of the Obama Administration, the Secretary had approved 31,773 applications and found 245 ineligible, for a 99.2% grant rate. Borrowers, however, had submitted 72,877 applications (AR 392–94, 502–05). 20 U.S.C. § 1087e(h) ; 81 Fed. Reg. 39,329 (June 16, 2016); 81 Fed. Reg. 75,926 (Nov. 1, 2016).

In 2017, newly-installed Secretary DeVos moved to rein in the previous administration's overzealous (as she put it) grant of relief to borrowers. Between December 2017 and May 2018, the Secretary reportedly decided 26,000 claims from Corinthian students, approving 16,000 under a new relief methodology. But a judge (in this district) preliminarily enjoined this partial-relief methodology for its likely violation of the Privacy Act, 5 U.S.C. § 552a (AR 006–007, 350). Calvillo Manriquez v. Devos , 345 F. Supp. 3d 1077 (N.D. Cal. 2018) (Magistrate Judge Sallie Kim).

Up to that point in June 2018, the two administrations had granted 47,942 applications and denied or closed 11,940 since 2015. Borrowers had submitted in total, however, 165,880 applications, leaving 105,998 still to be decided. Then, despite the backlog, the decisions stopped. For eighteen months , from that June 2018 until December 2019, the Secretary issued no decisions, even as the backlog mounted (AR 397–404, 587–88).

A putative class of student-loan borrowers, not already involved in Calvillo Manriquez , sued in June 2019 to compel the Secretary to restart the adjudication process. An October 2019 order certified a nationwide class of approximately 160,000 borrower-defense applicants who still awaited decision. In November, the Secretary certified an administrative record to explain her delay (though, without any declaration by the Secretary herself) and, at summary judgment, justified the eighteen-month delay on (among others) staffing shortages and competing priorities, such as developing the new relief method. But most forcefully, the Secretary argued that:

Issuing final decisions on such claims is time-consuming and complex, with many steps in the adjudicatory process, and agencies must be given, within reason, the time necessary to analyze the issues presented so that they can reach considered results.

(Dkt. No. 63) (cleaned up). But before a ruling could be had, the parties reached a proposed settlement, which would have imposed an eighteen-month deadline for the Secretary to decide outstanding claims. Preliminary approval followed, yet as the class fairness hearing approached, major problems emerged.

We'd known at summary judgment that in December 2019, with around 225,000 claims pending, the Secretary had released an updated "tiered relief methodology" and issued 16,045 decisions. We'd also known that, in a marked departure from the previous grant-denial ratio, she had approved only 789 applications and denied the remainder. We had little indication, however, how matters would progress (AR 587–601).

Not well, we learned. While negotiating the proposed settlement, and while awaiting this Court's final approval, the Secretary had been issuing alarmingly-curt denial notices for several months, in violation (as class counsel put it) of both the spirit of the proposed settlement and the Administrative Procedure Act. And, in contrast to the previous administration's 99.2% grant rate, the Secretary had run up a 94.4% denial rate for our borrowers — denying 74,000 applications and granting only 4,400 (Dkt. No. 116).

An order dated October 19, 2020, recognized the apparent pretext for what it was. The perfunctory form-denial letters stood in contrast to the supposed basis for the delay — the " ‘time-consuming,’ ‘complex,’ legal analysis of both borrower-submitted and agency evidence, ‘under applicable State law,’ to ‘reach considered results.’ " Sweet v. DeVos , 495 F. Supp. 3d 835, 844 (N.D. Cal. 2020). As the United States Supreme Court has long held and recently reemphasized, "meaningful judicial review" requires "an agency [to] ‘disclose the basis’ of its action." Dep't of Commerce v. New York , 588 U.S. ––––, 139 S. Ct. 2551, 2573–76, 204 L.Ed.2d 978 (2019) (quoting Burlington Truck Lines, Inc. v. United States , 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962) ). Given the extraordinary circumstances, the Court denied final approval of the proposed settlement and ordered written discovery and the depositions of five Department officials overseeing the borrower-defense apparatus (except for the Secretary herself) to determine the actual bases for the eighteen-month delay and to probe the development, approval, and use of the form-denial letters. The Court also ordered the Secretary to show cause why she should not be enjoined from issuing further form denials to our classmembers, and the Secretary agreed to abstain until further order (Dkt. No. 150). Sweet , 495 F. Supp. 3d at 847.

Plaintiffs have taken discovery over the past several months, including four depositions. Secretary DeVos resigned her post on January 8, 2021, so a January 12 order authorized class counsel to seek her deposition. Counsel then issued a subpoena for that deposition, and the Secretary moved to quash. The District Court for the Southern District of Florida transferred the matter to this district and the Court of Appeals for the Eleventh Circuit denied review (Dkt. Nos. 1, 28). In re Elisabeth DeVos , No. 21-11239, Order (11th Cir. May 7, 2021). This order follows full briefing and oral argument (held telephonically due to COVID-19).

* * *

Even assuming Secretary DeVos retains some measure of executive prerogative, she must answer an appropriately issued subpoena. Judicial process runs even to unwilling executives. Chief Justice Marshall first ruled that a subpoena could require a president's production of documents material to the defense when presiding over Vice President Burr's treason trial. United States v. Burr , 25 F. Cas. 30 (No. 14,692d) (C.C.D. Va. 1807). For the same reasons, in 1818, President Monroe answered written interrogatories on summons by the defense in a court martial. In 1974, a unanimous Supreme Court ordered President Nixon's compliance with a subpoena for the White House tapes. President Clinton twice gave videotaped testimony for criminal proceedings and, most famously, sat for deposition in a civil suit regarding his conduct as governor of Arkansas. Clinton v. Jones , 520 U.S. 681, 703–05, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997) (citing Ronald D. Rotunda, Presidents & Ex-Presidents as Witnesses: A Brief Historical Footnote , 1975 U. ILL. L. FORUM 1, 4–7 (1975)); see Jones v. Clinton , No. LR-C-94-290 SWW, Dkt. No. 229 (E.D. Ark. Jan. 14, 1998).

If judicial process runs to presidents, it runs to cabinet secretaries — especially former ones. The Supreme Court, nevertheless, requires some deference to agency heads summoned to explain their actions. In the seminal case on this point, the Supreme Court observed that Secretary of Agriculture Henry Wallace (by then Vice President) "should never have been" compelled to testify to the bases for certain challenged orders. United States v. Morgan , 313 U.S. 409, 422, 61 S.Ct. 999, 85 L.Ed. 1429 (1941). Setting aside that Congress would not pass the Administrative Procedure Act for five more years, no United States Court of Appeals has read Morgan as a rigid bar against the subpoena of a cabinet secretary for either production or testimony.

Our court of appeals has read Morgan as a word of caution that "[h]eads of government agencies are not normally subject to deposition." Kyle Engineering Co. v. Kleppe , 600 F.2d 226, 231 (9th Cir. 1979). Though our court of appeals has spoken no further on this...