CASE NO.

22-3179

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

STATE OF NEBRASKA, et al.,

Plaintiffs-Appellants,
v.
JOSEPH R. BIDEN, JR., in his official capacity as the President of the
United States of America, et al.,
Defendants-Appellees.

On Appeal from the United States District Court

for the Eastern District of Missouri
The Honorable District Court Judge Henry E. Autrey
Case No. 4:22-cv-1040-HEA

EMERGENCY MOTION FOR INJUNCTION PENDING APPEAL

ERIC S. SCHMITT DOUGLAS J. PETERSON

Attorney General of Missouri Attorney General of Nebraska
D. JOHN SAUER JAMES A. CAMPBELL
Solicitor General of Missouri Solicitor General of Nebraska
MICHAEL E. TALENT CHRISTIAN EDMONDS
Deputy Solicitor General of Missouri Assistant Solicitor General of
MISSOURI ATTORNEY GENERAL’S Nebraska
OFFICE OFFICE OF THE NEBRASKA
Post Office Box 899 ATTORNEY GENERAL
Jefferson City, MO 65102 2115 State Capitol
(314) 340-4869 Lincoln, NE 68509
[email protected] (402) 471-2682
[email protected]

Appellate Case: 22-3179 Page: 1 Date Filed: 10/21/2022 Entry ID: 5210216
 TABLE OF CONTENTS

INTRODUCTION ...................................................................................... 1

STATEMENT ............................................................................................ 2

I. Background on Student Loans......................................................... 2

II. Mass Debt Cancellation ................................................................... 4

III. Procedural History ........................................................................... 6

ARGUMENT ............................................................................................. 7

I. The States have a strong likelihood of success on appeal. .............. 8

A. The States have standing. ...................................................... 8

1. Missouri has standing to vindicate the harms to

MOHELA as a servicer of Direct Loans. ....................... 8

2. The direct tax losses create standing. ......................... 11

3. The consolidation harms create standing. .................. 13

4. The States’ sovereign and quasi-sovereign

interests create standing. ............................................ 15

B. The States are likely to prevail on their APA claim that

the Department is exceeding its authority. .......................... 16

1. The major-questions doctrine applies.......................... 17

2. No clear congressional authorization exists. ............... 19

C. The States are likely to prevail on their APA arbitrary-

and-capricious claim. ............................................................ 22

D. The States are likely to prevail on their ultra-vires

separation-of-powers claim. .................................................. 24

II. The States face irreparable harm without an injunction.............. 25

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III. An injunction would not injure the Department, and the
public interest favors an injunction. .............................................. 26

CONCLUSION ........................................................................................ 27

CERTIFICATE OF COMPLIANCE ........................................................ 30

CERTIFICATE OF SERVICE................................................................. 31

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 INTRODUCTION

The Supreme Court just warned federal agencies against “asserting

highly consequential power beyond what Congress could reasonably be

understood to have granted.” West Virginia v. EPA, 142 S. Ct. 2587, 2609

(2022). Yet the Biden Administration is doing exactly that through its

Mass Debt Cancellation, which will erase over $400 billion of the $1.6

trillion in outstanding federal student loan debt.

The statute on which the Administration relies—the Higher Educa-

tion Relief Opportunities for Students Act (HEROES Act)—does not

empower the Department of Education or its Secretary to decree the

Cancellation. This agency action thus exceeds the Administration’s auth-

ority, violates the separation of powers, and is hopelessly arbitrary.

This Court should enter an injunction pending appeal because the

States have standing, are facing irreparable harm, and are likely to

succeed on the merits of their claims. In contrast, no borrower will be

disadvantaged by interim relief because loan repayments and interest

accruals are paused, and the Department can continue that forbearance

while this appeal is pending.

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 STATEMENT

I. Background on Student Loans

The Higher Education Act (HEA) establishes the Direct Loan

Program and Federal Family Education Loan (FFEL) Program. 20

U.S.C. §§1071 et seq. (FFEL), 1087a et seq. (Direct). Direct Loans are

held by the Department and serviced by entities that contract with the

Department. See R. Doc. 5-1, at 194–254. The Higher Education Loan

Authority of the State of Missouri (MOHELA)—a “public instru-

mentality” of the State of Missouri, Mo. Rev. Stat. §173.360—is one of

those servicers and customer-support providers. See R. Doc. 5-1, at 194–

396. MOHELA services accounts for borrowers in all 50 States. See id.

at 92–93.

FFEL loans are held by either the Department or non-federal

organizations. See R. Doc. 31-1, at 7–10. Borrowers may consolidate

FFEL loans into Department-held Direct Loans, thereby eliminating the

original FFEL loans. See id. at 19–20.

Financial entities that hold FFEL loans use them as assets to

secure bonds, and they earn income from the payments on those loans.

See R. Doc. 5-1, at 60, 66; R. Doc. 5-4, at 2, ¶6. MOHELA not only holds

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FFEL loans but also services those loans, which provides it with “ongoing

revenue streams” from the interest payments and servicing fees. R. Doc.

5-1, at 66–67. Like MOHELA, the Arkansas Student Loan Authority

(ASLA)—part of the Arkansas Development Finance Authority—holds

FFEL loans. R. Doc. 5-4, at 2, ¶6.

Many institutions also invest in student-loan asset-backed secur-

ities (SLABS) secured by FFEL loans. See R. Doc. 5-2, at 1–2, ¶¶4–5.

The Nebraska Investment Council (NIC)—which invests assets of the

State of Nebraska, including the pension fund, see Neb. Rev. Stat. §72-

1239.01—has tens of millions of dollars in SLABS. See R. Doc. 5-2, at 1–

2, ¶¶4–7.

Soon after the COVID-19 pandemic began, then-President Trump,

Congress, and the Department paused payments and interest accrual on

Department-held student loans. See 85 Fed. Reg. 79856, 79862–63 (Dec.

11, 2020). The Department has repeatedly extended that forbearance,

and it is in place until December 31, 2022. See 87 Fed. Reg. 61512, 61514

(Oct. 12, 2022). Last month, the President declared “[t]he pandemic …

over.” 60 Minutes, Twitter (Sept. 18, 2022), https://tinyurl.com/

2s35maau.

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II. Mass Debt Cancellation

Meanwhile, on August 24, 2022, the Administration announced its

Mass Debt Cancellation. R. Doc. 5-3, at 4. An Administration official

explained that President Biden had “promised to provide targeted stu-

dent debt relief” “[d]uring the [2020 presidential] campaign” and was now

“following through on that.” Id. at 29. In an accompanying memoran-

dum, the Department revoked its prior view that cannot cancel student

debt en masse, see Memorandum from Rubinstein to DeVos 6 (Jan. 12,

2021), https://tinyurl.com/3kp29ys6 [Jan. 2021 Memo], claiming for the

first time that it has such power, see 87 Fed. Reg. 52943 (Aug. 30, 2022).

The Congressional Budget Office estimates that this Cancellation

will eliminate $430 billion of the $1.6 trillion in federal student debt.

CBO Sept. 26, 2022 Letter at 3, https://tinyurl.com/2p95x8kk. Other

analyses project that the costs will reach up to $519 billion. R. Doc. 5-3,

at 23. Of the 43 million borrowers who still owe, see CBO Sept. 26, 2022

Letter at 3, over 40 million will be eligible for the Cancellation, and

nearly 20 million “will have their debt completely canceled.” R. Doc. 5-3,

at 31; R. Doc. 31-1, at 24.

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 To be eligible, borrowers must owe on Direct Loans, FFEL loans, or

Perkins loans held by the Department. 87 Fed. Reg. at 61514. Borrowers

also must have had “an Adjusted Gross Income (AGI) below $125,000 for

an individual taxpayer or below $250,000 for borrowers filing jointly …

in either the 2020 or 2021 Federal tax year.” Id. (emphasis added). The

Department will cancel up to $20,000 for eligible borrowers who received

a Pell grant and $10,000 for those who did not. Id.

Originally, the Department told “borrowers with privately held

federal student loans,” including FFEL loans, that they can receive the

Cancellation “by consolidating these loans into the Direct Loan program.”

R. Doc. 5-3, at 9. This incentivized borrowers to consolidate their non-

federally held FFEL loans into Direct Loans. See Carmen Arroyo, Biden’s

Student-Loan Relief Plan Stirs a $100 Billion Plus Debt Market,

Bloomberg (Sept. 2, 2022), https://tinyurl.com/43sc7ec4.

On October 7, the Department first produced its August 24 Ration-

ale Memo attempting to justify the Cancellation. R. Doc. 27-1, at 10–22.

That Memo did not consider any alternative to the widespread elimina-

tion of debt. Nor did it address why the Cancellation includes households

earning up to $250,000 or why it is enough if a borrower falls under the

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income cutoff in 2020 or 2021 (rather than in both years). The Secretary

did not carefully consider the Memo but rather signed off on it at 9:25 am

the morning he received it. Id. at 25.

On October 12, the Secretary published the Cancellation’s terms in

the Federal Register. 87 Fed. Reg. 61512.

III. Procedural History

The States filed this suit on September 29. R. Doc. 1. That same

day, the Department announced that borrowers with non-federally held

FFEL loans can no longer become eligible “by consolidating those loans

into Direct Loans,” but that borrowers “who have applied to consolidate

… prior to Sept. 29[] are eligible.” R. Doc. 31-1, at 9. The Department

made this change to try to avoid lawsuits like this one because entities

holding and investing in FFEL loans were “widely seen, both inside and

outside the administration, as presenting the greatest legal risk” to the

Cancellation. Michael Stratford, Biden Administration Scales Back

Student Debt Relief for Millions Amid Legal Concerns, Politico (Sept. 29,

2022), https://tinyurl.com/2hexr9cf.

Also on September 29, the States moved for a preliminary injunc-

tion. R. Doc. 3. In response, the Department told the district court that

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it might start discharging debt as soon as October 23. R. Doc. 27-1, at 4,

¶5. On October 20, the district court denied the States’ motion for a pre-

liminary injunction and dismissed their case for lack of standing. R. Doc.

44 & 46. Later that day, the States filed a notice of appeal, R. Doc. 47,

and asked the district court for an injunction or administrative stay

pending appeal, R. Doc. 48. Thereafter, the States filed this emergency

motion without waiting for the district court’s ruling because further

delay was “impracticable” since the Department might start discharging

debt in just two days. Fed. R. App. P. 8(a)(2)(A)(i).

ARGUMENT

“To be entitled to an injunction pending appeal, appellants … must

show (1) the likelihood of success on the merits; (2) the likelihood of

irreparable injury to appellants absent an injunction; (3) the absence of

any substantial harm to other interested parties if an injunction is

granted; and (4) the absence of any harm to the public interest if an

injunction is granted.” Shrink Missouri Gov’t PAC v. Adams, 151 F.3d

763, 764 (8th Cir. 1998). Those factors support an injunction here.

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I. The States have a strong likelihood of success on appeal.

A. The States have standing.

“[T]he presence of one party with standing is sufficient to satisfy

Article III’s case-or-controversy requirement.” Rumsfeld v. FAIR, 547

U.S. 47, 52 n.2 (2006). To establish standing, plaintiffs must show injury,

causation, and redressability. Kuehl v. Sellner, 887 F.3d 845, 850 (8th

Cir. 2018). States are “entitled to special solicitude in [the] standing

analysis.” Massachusetts v. EPA, 549 U.S. 497, 520 (2007). The States

here have established standing in four ways.

1. Missouri has standing to vindicate the harms to

MOHELA as a servicer of Direct Loans.

Missouri is harmed from the financial losses that the Cancellation

inflicts on MOHELA as a servicer of Direct Loans. MOHELA is “a public

instrumentality” of the State of Missouri. Mo. Rev. Stat. §173.360. Its

board is comprised of public officials and individuals appointed by the

governor with the consent of the Missouri Senate. Id. It is part of the

Missouri Department of Higher Education and Workforce Development.

§173.445.

State law charges MOHELA with the “essential public function[s]”

of ensuring “all eligible postsecondary education students have access to

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student loans” and providing financial support to Missouri’s public

colleges and universities. §173.360. To further these goals, MOHELA

originated over $4 million in loans for Missouri students during the last

fiscal year and gave $6 million to the State’s Department of Higher

Education for various financial assistance programs benefiting Missouri

students and schools: Access Missouri Financial Assistance Program;

Bright Flight Scholarship fund; and A+ Scholarship Program. MOHELA

FY 2022 Financial Statement at 9–10, 19, https://tinyurl.com/4chp295x.

MOHELA funds those essential public functions through its work

as a servicer of and customer-support provider for Direct Loans. See R.

Doc. 5-1, at 194–396 (MOHELA’s contracts). Last fiscal year, MOHELA

earned $88.9 million for “servicing 5.2 million” Direct Loan accounts and

$5.1 million for customer support. MOHELA FY 2022 Financial State-

ment at 4. This revenue is determined by how many accounts MOHELA

services—the more it services, the more it earns, see R. Doc. 5-1, at 197–

98, 209–10, 258–69—and the Cancellation will result in nearly half of all

borrowers (20 of 43 million) having “their debt completely” eliminated, R.

Doc. 5-3, at 31. Because many borrowers have more than one account,

see R. Doc. 5-1, at 403–07, MOHELA stands to lose at least half of the

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Direct Loan accounts it services, which equates to millions of dollars of

revenue per year. Stripping MOHELA of that money will leave fewer

resources to fund loans and provide financial assistance through the

State’s Department of Higher Education. That is a cognizable harm to

the State. See Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 983

(2017) (“[A] loss of even a small amount of money is ordinarily an

‘injury.’”).

The district court dismissed MOHELA’s interests by claiming that

the “financial harms” to MOHELA “are not attributable to” Missouri. R.

Doc. 44, at 13. But MOHELA is a state entity within Missouri’s Depart-

ment of Higher Education and Workforce Development run by state

officials performing essential state functions. See Mo. Rev. Stat.

§§173.360, 173.445. That entity’s undisputed financial harms directly

affect Missouri by hindering MOHELA from advancing its essential

public purposes. Missouri has standing “to protect” these “rights and

interests of the state” in court. Mo. Rev. Stat. §27.060.

The district court’s analysis focused on whether Missouri’s Ele-

venth Amendment sovereign immunity extends to MOHELA as an “arm

of the State.” See Doc. 44, at 9 (citing that framework). But sovereign

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immunity and standing are “distinct jurisdictional requirements.” Duit

Constr. Co. v. Bennett, 796 F.3d 938, 940 (8th Cir. 2015); accord

Calderon v. Ashmus, 523 U.S. 740, 745 n.2 (1998) (the two are not “coex-

tensive”).

The district court also emphasized that Missouri’s general revenues

are not available to pay MOHELA’s debts. See R. Doc. 44, at 10–11. Yet

that does not change the fact that MOHELA is (1) a state entity (2) that

will be financially harmed by the Cancellation (3) and that uses its finan-

ces to perform the “essential public function[s]” of providing student

loans and supporting the State’s higher education system. Mo. Rev. Stat.

§173.360. Those facts establish standing.

2. The direct tax losses create standing.

Nebraska, Iowa, Kansas, and South Carolina face a “direct injury

in the form of a loss of specific tax revenues.” Wyoming v. Oklahoma, 502

U.S. 437, 448 (1992). To determine an individual’s taxable state income,

those States use the individual’s federal adjusted gross income as a

baseline. See Neb. Rev. Stat. §77-2714.01(1); Iowa Code §422.7; Kan.

Stat. Ann. §79-32,117(a); S.C. Code §12-6-40. Normally, federal adjusted

gross income includes student loan discharge. See 26 U.S.C. §61(a)(11).

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But under the American Rescue Plan Act of 2021, discharges occurring

before January 1, 2026, are not included in federal adjusted gross income.

See 26 U.S.C. §108(f)(5).

Under existing law, the States are set to tax a substantial amount

of student loan debt discharge after 2025. Because the Cancellation will

immediately reduce the pool of debt to discharge in the future, it will

result in less for the States to tax. Contrary to what the district court

said, see R. Doc. 44, at 18, that injury is “actual” and “imminent,”

Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013). The tax laws are

clear, and so their results here are certainly impending. Even if the total

loss is unknown, that doesn’t matter because any monetary loss is an

Article III injury. See Czyzewski, 137 S. Ct. at 983. The Cancellation will

deprive the States of tax revenue, and they have standing to prevent such

losses.

The district court reasoned that State “legislatures are free to pro-

pose and pass tax revenue plans as they see fit.” R. Doc. 44, at 18. But

the States cannot “avoid injury altogether” because forcing them to exer-

cise their “power to create and enforce a legal code” is itself an injury, and

“the possibility that a plaintiff could avoid [one] injury by incurring

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[another] does not negate standing.” Texas v. United States, 809 F.3d

134, 156–57 (5th Cir. 2015).

3. The consolidation harms create standing.

Missouri, Arkansas, and Nebraska have experienced various harms

because the Cancellation predictably prompted the extensive consolida-

tion—and thus elimination—of non-federally held FFEL loans. See Dep’t

of Commerce v. New York, 139 S. Ct. 2551, 2566 (2019) (establishing a

causal connection through the “predictable effect of Government action

on the decisions of third parties”).

Starting with Missouri, this consolidation harms the State because

it erases assets—FFEL loans—that MOHELA uses to secure bonds; it

ends ongoing interest payments from those loans; and it stops the fees

earned from servicing those loans. See R. Doc. 5-1, at 66–67, 87.

Eliminating those FFEL loans thus “reduc[es] the return on [MOHELA’s]

investments” and inflicts an “actual financial injury.” Franchise Tax Bd.

of California v. Alcan Aluminum Ltd., 493 U.S. 331, 336 (1990).

Arkansas is similarly injured through ASLA. Before the Cancell-

ation, ASLA held $100 million in FFEL loans. R. Doc. 5-4, at 2, ¶6. Since

the program was announced, about $6 million of those loans have been

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consolidated. Id. at 2, ¶7. Because ASLA’s administrative fee is based

on the amount of its FFEL loans, the Cancellation has reduced ASLA’s

revenue. Id. at 2, ¶8. That, in turn, lowers ASLA’s funding to pursue its

finance- and education-focused mission. See Ark. Code Ann. §15-5-

1904(c) (listing those goals).

Nebraska is also harmed by consolidation. NIC invests tens of

millions of dollars in SLABS. See R. Doc. 5-2, at 1–2, ¶¶4–7. But

consolidating FFEL loans raises repayment rates on the loans held in

FFEL SLABS, which returns the principal early and ends the interest

income that SLABS are intended to generate. See R. Doc. 5-1, at 48

(noting that a FFEL-backed security might be harmed if “prepayments”

of FFEL loans increase because they “are consolidated under the Direct

Loan Program”); R. Doc. 5-2, at 2, ¶8 (expecting the Cancellation “will

increase prepays for FFELP SLABS”). Harming Nebraska’s investments

in this way inflicts an “actual financial injury.” See Franchise Tax Bd.,

493 U.S. at 336.

The district court concluded that the consolidation harms have

stopped because borrowers with non-federally held FFEL loans can no

longer become eligible through consolidation. R. Doc. 44, at 13–14. This

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ignores that “voluntary cessation of a challenged practice” generally

“does not moot a case.” Trinity Lutheran Church of Columbia, Inc. v.

Comer, 137 S. Ct. 2012, 2019 n.1 (2017). This rule is particularly salient

here since the Department is looking for “alternative pathways to provide

relief to borrowers with federal student loans not held by [the Depart-

ment], including FFEL Program loans.” R. Doc. 31-1, at 9–10. Moreover,

an immediate injunction preventing the Department from discharging

debt preserves the chance for a permanent injunction remedying some of

the consolidation harms, such as an order telling the Department to

direct borrowers who recently consolidated FFEL loans to pay part of the

interest to the entity that held the FFEL loan.

4. The States’ sovereign and quasi-sovereign inter-

ests create standing.

The States also have standing to vindicate the sovereign and quasi-

sovereign interests that the Cancellation impairs. States have “a quasi-

sovereign interest in the health and well-being—both physical and

economic—of [their] residents in general.” Alfred L. Snapp & Son, Inc.

v. Puerto Rico, ex rel., Barez, 458 U.S. 592, 607 (1982). And States may

assert their sovereign and quasi-sovereign interests against “the United

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States and its agents.” Kentucky v. Biden, 23 F.4th 585, 596–99 (6th Cir.

2022).

Here, the States raise multiple sovereign and quasi-sovereign inter-

ests. First is Missouri’s interest in MOHELA furthering the “essential

public function[s]” of providing student aid and funding the State’s public

universities. Mo. Rev. Stat. §173.360. When the Cancellation reduces

MOHELA revenue and diminishes its access to bond markets, it impairs

Missourians’ access to higher education and harms the State’s “interest

in the … well-being … of its residents.” Alfred L. Snapp, 458 U.S. at 607.

Second is the similar harm to Arkansas through ALSA. The reduction in

its revenue will limit its ability to provide educational opportunities to

Arkansans through student loans. See Ark. Code Ann. §15-5-1904(c).

B. The States are likely to prevail on their APA claim that

the Department is exceeding its authority.

Under the APA, a reviewing court shall “hold unlawful and set

aside agency action” that is “in excess of statutory … authority.” 5 U.S.C.

§706(2)(A)–(C). The Department claims authority under the HEROES

Act. That Act provides, in relevant part, that the Secretary may “waive

or modify any statutory or regulatory provision applicable to student

financial assistance programs” when “necessary to ensure that recipients

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of student financial assistance … who are affected individuals are not

placed in a worse position financially in relation to that financial

assistance because of their status as affected individuals.” 20 U.S.C.

§1098bb(a)(1)–(a)(2)(A). This text does not authorize the Cancellation.

1. The major-questions doctrine applies.

The Supreme Court just reaffirmed that a federal agency may regu-

late on issues of immense “economic and political significance” only with

explicit congressional authorization. West Virginia, 142 S. Ct. at 2608.

The Court “presume[s] that Congress intends to make major policy

decisions itself, not leave those decisions to agencies.” Id. at 2609

(cleaned up). These principles apply here.

First, as the Department conceded, see R. Doc. 27, at 41, it is

claiming the authority to resolve a matter of great “economic and political

significance.” West Virginia, 142 S. Ct. at 2608. With estimated costs

between $430 billion and $519 billion, see CBO Sept. 26, 2022 Letter at

3; R. Doc. 5-3, at 23, the economic significance is plain. See Ala. Ass’n of

Realtors v. Dep’t of Health & Hum. Servs., 141 S. Ct. 2485, 2489 (2021)

(per curiam) ($50 billion effect). So is the political significance. Congress

has “conspicuously and repeatedly declined to enact” the Cancellation,

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West Virginia, 142 S. Ct. at 2610, rejecting many sweeping student loan

discharge efforts, including some bills specifically tied to COVID-19

relief. E.g., H.R. 2034, 117th Cong. (2021); H.R. 6800, 116th Cong.

§150117(h) (2020); S. 2235, 116th Cong. (2019).

Second, the Department claims an “unheralded power.” West Vir-

ginia, 142 S. Ct. at 2610. Until now, the Department has “generally

invoked the HEROES Act relatively narrowly to grant relief to limited

subsets of borrowers, such as deployed military service members or

victims of certain natural disasters.” The Biden Administration Extends

the Pause on Federal Student Loan Payments, Congressional Research

Service, at 2–3 (Jan. 27, 2021), https://tinyurl.com/yxwm4eyj. It has not

“relied on the HEROES Act … for the blanket or mass cancellation … of

student loan principal balances.” Jan. 2021 Memo at 6.

Third, “[t]here is little reason to think Congress” intended the

HEROES Act to authorize the Cancellation. West Virginia, 142 S. Ct. at

2612. The congressional findings leave no doubt that Congress’s focus

was affording relief to those serving in the “military” for “our nation’s

defense.” 20 U.S.C. §1098aa(b)(1)–(6). They are not focused on nation-

wide debt cancellation.

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 Fourth, “the sheer scope of the [Department’s] claimed authority”

confirms that the major-questions doctrine applies. Ala. Ass’n of Real-

tors, 141 S. Ct. at 2489. The Department claims that the class of “affected

individuals” for whom it may grant relief includes every “borrower who

‘resides or is employed in’” the United States or “abroad.” R. Doc. 27, at

33–34. And it suggests that it could discharge all borrowers’ “entire loan

amount” if necessary to “mitigate the risk that delinquency and default

rates will rise.” R. Doc. 27-1, at 14. Courts greet such “assertions of

extravagant statutory power” with skepticism. West Virginia, 142 S. Ct.

at 2609 (cleaned up).

2. No clear congressional authorization exists.

When the major-questions doctrine applies, “the Government must

… point to clear congressional authorization” permitting its action. West

Virginia, 142 S. Ct. at 2614 (quotation marks omitted). None exists here.

First, the HEROES Act requires that the Secretary’s relief is “nece-

ssary to ensure” the assisted borrowers will not fall into “a worse position

financially in relation to” their student loans. 20 U.S.C. §1098bb(a)(2)(A).

But the Cancellation does not simply prevent borrowers from slipping

into a worse position; it seeks to place them in a better position by

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reducing the principal they owe. Additionally, the Secretary has not

shown that cancelling up to $20,000 in debt is necessary to keep most

eligible borrowers out of trouble.

Second, the Act permits relief “in connection with a … military

operation or national emergency.” 20 U.S.C. §1098bb(a)(1). Military

operations and national emergency are by nature temporary, and the

same must be true of the relief afforded. See Jarecki v. G.D. Searle &

Co., 367 U.S. 303, 307 (1961) (“a word is known by the company it keeps”).

Here, however, the Cancellation, unlike the payment pause, purports to

permanently erase up to $20,000 per borrower.

Third, the Act demands that the “affected individuals” benefitted

by the relief must be at risk of facing “a worse position financially in

relation to” their loans. 20 U.S.C. §1098bb(a)(2)(A). But many eligible

borrowers—for example, individuals whose annual income has increased

substantially since 2020 (including growth above the Cancellation’s in-

come cutoff)—are not remotely at risk of falling into a worse position. See

87 Fed. Reg. at 61514 (requiring borrowers to meet the income cutoff in

2020 or 2021).

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 Fourth, the Act limits relief to “affected individuals.” 20 U.S.C.

§1098bb(a)(2)(A). Yet the Cancellation is not confined to borrowers who

have suffered “direct economic hardship as a direct result” of the pan-

demic. 20 U.S.C. §1098ee(2)(D). Nor is it restricted to people who live or

work in “a disaster area” in the United States. 20 U.S.C. §1098ee(2)(C).

Fifth, the Act applies only when borrowers are facing “a worse

position financially in relation to [their] financial assistance because of ”

the invoked national emergency. 20 U.S.C. §1098bb(a)(2)(A) (emphasis

added). The Department worries that borrowers’ position might deter-

iorate because forbearance is ending and economic conditions are diffi-

cult. R. Doc. 27-1, at 10–13. But these concerns stretch beyond COVID-

19. Forbearance is a prior agency action benefitting borrowers, and

current economic conditions, as the Department admits, are caused by

myriad factors unrelated to COVID-19. See id. at 12 (citing “other factors

(such as Russia’s invasion of Ukraine)”). The Department’s economic

concerns are not “because of” COVID-19.

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 C. The States are likely to prevail on their APA arbitrary-
and-capricious claim.

Courts applying the APA must “hold unlawful and set aside agency

action” that is “arbitrary” or “capricious.” 5 U.S.C. §706(2)(A). The

Cancellation is arbitrary and capricious for at least five reasons.

First, the Department’s Rationale Memo failed to consider any rea-

sonable alternatives to the mass elimination of debt. “[W]hen an agency

rescinds a prior policy its reasoned analysis must consider the alterna-

tives that are within the ambit of the existing policy.” Dep’t of Homeland

Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1913 (2020)

(cleaned up). The Department is switching from a forbearance policy to

the Cancellation, so it must consider alternatives, such as (1) continuing

forbearance or (2) lengthening repayment periods to decrease monthly

payments. Because those alternatives (particularly continued forbear-

ance) are plainly within the ambit of the Department’s existing policy,

the failure to consider them is enough to “render[] [the] decision arbi-

trary.” Regents, 140 S. Ct. at 1913.

Second, the Department’s reliance on COVID-19 as a justification

for the Cancellation is “pretextual,” Dep’t of Commerce, 139 S. Ct. at 2573,

and an impermissible “post hoc rationalization,” Regents, 140 S. Ct. at

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1908. The agency did not first identify the Cancellation as “necessary” to

protect borrowers. 20 U.S.C. §1098bb(a)(2)(A). Rather, student loan can-

cellation has long been the President’s goal, and his Administration is

using the pandemic as cover to “follow[] through” on his campaign “pro-

mise.” See R. Doc. 5-3, at 29. Confirming this, the Secretary signed the

directive to launch the Cancellation at 9:25 am on the day he received the

Rationale Memo, see R. Doc. 27-1, at 25, showing that the supposed

reliance on COVID-19 is “contrived,” Dep’t of Commerce, 139 S. Ct. at

2575.

Third, the Department has not even tried to justify the Cancella-

tion’s exceedingly broad and arbitrary scope. The agency documents do

not offer any explanation—much less the required reasonable explan-

ation—for the $250,000 household income cutoff. Nor has the agency

bothered to address why it is sufficient if borrowers meet the income

requirement in either 2020 or 2021 (rather than in both years). Such

failures to address central eligibility requirements—which drive the

Cancellation’s broad scope—cannot survive review.

Fourth, because the Department is changing its forbearance policy

and thus “not writing on a blank slate, it was required to assess whether

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there were reliance interests, determine whether they were significant,

and weigh any such interests against competing policy concerns.”

Regents, 140 S. Ct. at 1915. But nothing in the agency materials suggests

that the Department did this. The failure to “consider[]” any “reliance

interests” is “arbitrary and capricious.” Id.

Fifth, the Department’s September 29 change on FFEL consolida-

tion is also arbitrary, distinguishing borrowers with non-federally held

FFEL loans who applied for consolidation before September 29 from

those who did not. R. Doc. 31-1, at 9. The agency never attempts to

justify this arbitrary distinction. Nor is there any reasonable explanation

for it.

D. The States are likely to prevail on their ultra-vires

separation-of-powers claim.

The States are also likely to prevail on their ultra-vires separation-

of-powers claim. An “implied private right of action” exists “directly

under the Constitution to challenge [unconstitutional] governmental

action” by the federal government. Free Enter. Fund v. Pub. Co. Acct.

Oversight Bd., 561 U.S. 477, 491 n.2 (2010). That includes suits against

federal officials for “actions [that] are ultra vires [their] authority” or in

violation of the Constitution. Larson v. Domestic & Foreign Com. Corp.,

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337 U.S. 682, 689–90 (1949). Thus, “judicial review is available” for the

States’ ultra-vires separation-of-powers claim “even if a statutory cause

of action” under the APA “is lacking.” Trudeau v. Fed. Trade Comm’n,

456 F.3d 178, 190 (D.C. Cir. 2006). The States are likely to succeed on

this claim because, as explained above, the Cancellation exceeds the

Administration’s statutory and constitutional authority.

II. The States face irreparable harm without an injunction.

Without immediate injunctive relief, the States will suffer irrepar-

able harm. All four categories of injuries identified in the standing analy-

sis are irreparable.

First, Missouri faces irreparable injury through the financial harms

to MOHELA. The Cancellation will cause Direct Loan accounts to dis-

appear, which will cost MOHELA revenue. That revenue is not recover-

able and thus “qualif[ies] as irreparable harm.” Iowa Utils. Bd. v. FCC,

109 F.3d 418, 426 (8th Cir. 1996); see also Baker Elec. Co-op., Inc. v.

Chaske, 28 F.3d 1466, 1473 (8th Cir. 1994) (finding irreparable harm

when defendants had “sovereign immunity” against “money damages”).

Second, the States’ loss of tax revenue is irreparable. Once the

Department discharges hundreds of billions of dollars in loan debt, that

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potential tax revenue will be lost for good. Tellingly, the Supreme Court

“enjoin[ed] enforcement of the Act” in Wyoming, 502 U.S. at 461,

indicating that it deemed irreparable the lost tax revenue.

Third, the harms to the States from FFEL loan consolidations also

cannot be undone. As discussed, the Department—which is searching for

“pathways to provide relief” to borrowers with non-federally held FFEL

loans, R. Doc. 31-1, at 9–10—might reopen the consolidation pathway to

eligibility. Thus, the incentive to consolidate, and the irreparable harm

of lost FFEL loans, remains.

Fourth, undermining MOHELA’s and ASLA’s financial health

harms Missouri’s and Arkansas’s quasi-sovereign interests in promoting

higher education. Injuries to these interests are widely dispersed, “diffi-

cult … to quantify,” cannot be remedied with damages, and thus are

irreparable. Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801,

805 (8th Cir. 2003).

III. An injunction would not injure the Department, and the

public interest favors an injunction.

An order preventing the Department from enforcing its unlawful

Mass Debt Cancellation will inflict no cognizable injury on the agency

because officials “do[] not have an interest in the enforcement of [illegal

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government action].” N.Y. Progress & Prot. PAC v. Walsh, 733 F.3d 483,

488 (2d Cir. 2013). Nor will an injunction harm borrowers because their

loan payments have been deferred and interest is not accruing, and the

Department can extend that forbearance.

The public interest similarly supports the States. “[T]he public’s

true interest lies in the correct application of the law.” Kentucky, 23 F.4th

at 612. Accordingly, “[t]here is generally no public interest in the

perpetuation of unlawful agency action.” League of Women Voters of

United States v. Newby, 838 F.3d 1, 12 (D.C. Cir. 2016). “[O]ur system

does not permit agencies to act unlawfully even in pursuit of desirable

ends.” Alabama Ass’n of Realtors, 141 S. Ct. at 2490. Since the Cancell-

ation is unlawful, the public interest supports enjoining it.

CONCLUSION

The States request an injunction pending appeal.

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Dated: October 21, 2022 Respectfully submitted,

/s/ James A. Campbell

James A. Campbell

ERIC S. SCHMITT DOUGLAS J. PETERSON

Attorney General of Missouri Attorney General of Nebraska
D. JOHN SAUER JAMES A. CAMPBELL
Solicitor General of Missouri Solicitor General of Nebraska
MICHAEL E. TALENT CHRISTIAN EDMONDS
Deputy Solicitor General of Missouri Assistant Solicitor General of
MISSOURI ATTORNEY GENERAL’S Nebraska
OFFICE OFFICE OF THE NEBRASKA
Post Office Box 899 ATTORNEY GENERAL
Jefferson City, MO 65102 2115 State Capitol
(314) 340-4869 Lincoln, NE 68509
[email protected] (402) 471-2682
[email protected]

LESLIE RUTLEDGE JEFFREY S. THOMPSON

Attorney General of Arkansas Solicitor General of Iowa
NICHOLAS J. BRONNI SAMUEL P. LANGHOLZ
Solicitor General of Arkansas Assistant Solicitor General of Iowa
DYLAN L. JACOBS OFFICE OF THE IOWA ATTORNEY
Deputy Solicitor General of Arkansas GENERAL
OFFICE OF THE ARKANSAS ATTORNEY 1305 E. Walnut Street
GENERAL Des Moines, Iowa 50319
323 Center Street, Suite 200 (515) 281-5164
Little Rock, AR 72201 [email protected]
(501) 682-2007 [email protected]
[email protected]

28
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DEREK SCHMIDT ALAN WILSON
Attorney General of Kansas Attorney General of South Carolina
SHANNON GRAMMEL J. EMORY SMITH, JR.
Deputy Solicitor General of Deputy Solicitor General of
Kansas South Carolina
OFFICE OF THE KANSAS ATTORNEY OFFICE OF THE ATTORNEY GENERAL
GENERAL OF SOUTH CAROLINA
120 SW 10th Avenue, 2nd Floor P.O. Box 11549
Topeka, KS 66612 Columbia, SC 29211
(785) 296-2215 803-734-3680
[email protected] [email protected]

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 CERTIFICATE OF COMPLIANCE

This motion complies with the type-volume limit of Fed. R. App. P.

27(d)(2)(A) because, excluding the parts exempted by Fed. R. App. P.

32(f), it contains 5,139 words as determined by the word-counting feature

of Microsoft Word 2016.

This motion also complies with the typeface requirements of Fed.

R. App. P. 32(a)(5) and the type-style requirements of Fed. R. App. P.

32(a)(6) because it has been prepared using Microsoft Word 2016 in 14-

point proportionally spaced Century Schoolbook font.

And this motion complies with the electronic-filing requirements of

Local Rule 28A(h)(2) because it was scanned for viruses using Windows

Defender and no virus was detected.

/s/ James A. Campbell

James A. Campbell

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 CERTIFICATE OF SERVICE

I certify that on October 21, 2022, I electronically filed the foregoing

motion with the Clerk of the Court by using the CM/ECF system, and

that the CM/ECF system will accomplish service on all parties repre-

sented by counsel who are registered CM/ECF users. I also certify that

a copy of the foregoing motion was served by electronic mail on counsel

for Defendants-Appellees who have consented in writing to electronic

mail service at the following addresses:

Thomas Pulham
[email protected]

Courtney L. Dixon
[email protected]

Simon C. Brewer
[email protected]

Michael S. Raab
[email protected]

Sarah W. Carroll
[email protected]

/s/ James A. Campbell

James A. Campbell

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