differently from students in other states, in violation of 20 U.S.C. § 1232(c) (Oral Argument Tr., Sept. 13, 1996, at 5). Defendants contend that these alleged violations, if true, would merely constitute the "improper exercise of an authorized function or power" of the Secretary, and as such would not justify an exception to the principle of sovereign immunity. Def. letter dated Sept. 10, 1996, at p. 7.
The question of whether the violation of mandatory duties in the calculation and publication of CDR rates constitutes action outside of the Secretary's authority - and is therefore enjoinable - has received different answers in different federal courts. See, e.g., Canterbury (New Jersey), supra, at 1104; Concorde Career Colleges, Inc. v. Riley, supra, at *5; Climate Control Institute of Oklahoma, Inc. v. Alexander, No. 93-C-55-E (N.D. Ok. Aug. 16, 1993), at 13-14 (improper calculation or publication of CDR rates is enjoinable); American Association of Cosmetology Schools v. Riley, No. CV96-4581-RMT (C.D. Ca. September 9, 1996), at 3; Student Loan Fund of Idaho, Inc. v. Riley, No. CV 94-0413-S-LMB (Magistrate Order, D. Id. Oct. 31, 1994), at 7; Canterbury (Sacramento), supra, at 7 (not enjoinable).
The Court of Appeals for the Second Circuit has never ruled directly on Section 1082. However, in Volges v. Resolution Trust Corporation, 32 F.3d 50 (2d Cir. 1994), cert denied, U.S. , 115 S. Ct. 2618, 132 L. Ed. 2d 860 (1995), the Second Circuit did consider an analogous anti-injunction provision in FIRREA, 12 U.S.C. § 1821(j), which states in relevant part that "no court may take any action ... to restrain or affect the exercise of powers or functions of the [Resolution Trust Corporation] as a conservator or a receiver." The issue in Volges was whether equitable relief could be granted, notwithstanding the terms of § 1821(j), on the ground that the RTC had violated the plaintiff's contractual rights in connection with the sale of mortgage assets under the agency's control. The district court had issued the requested injunctive relief, concluding that "the disposition of assets in violation of a ... contract was beyond the RTC's statutory powers--in effect ultra vires--and that the anti injunction provision therefore did not shield the RTC from the court's equitable jurisdiction." Id. at 52.
The Court of Appeals reversed, stressing the fundamental distinction "between the exercise of a function or power that is clearly outside the statutory authority of the RTC on the one hand, and improperly or even unlawfully exercising a function or power that is clearly authorized by statute on the other..." Id. at 53, quoting from Ward v. Resolution Trust Corporation, 996 F.2d 99, 103 (5th Cir. 1993) (per curiam). Only the first type of act, the Second Circuit noted, could conceivably justify an "exception to the anti-injunction provisions of § 1821(j)." Id., quoting Ward, supra, at 103. With regard to the facts before it on appeal, the Court found that since the RTC's actions were plainly within the scope of its enumerated powers, the fact that those actions "might violate some other provision of law does not render the anti-injunction provision inapplicable." 32 F.3d at 52. See also Gross, supra, at 408; National Trust for Historic Preservation v. FDIC, 301 U.S. App. D.C. 338, 995 F.2d 238, 240 (D.C.Cir. 1993) (per curiam), aff'd and reinstated on reh'g, 305 U.S. App. D.C. 375, 21 F.3d 469 (D.C.Cir.1994). The Court observed that this conclusion was compelled by the language and purpose of the statute itself, for if every party to an RTC contract "could obtain injunctive relief to prevent an alleged breach, the anti-injunction mandate would be severely restricted, if not meaningless." Id.
The reasoning of Volges is adopted here. Pursuant to the HEA, Secretary Riley manifestly possesses the authority to calculate and publish cohort default rates, and to rule on CDR appeals. See American Association of Cosmetology Schools v. Riley, supra, at 3; Canterbury (Sacramento), supra, at 8. Consequently, "to the extent there is an exception to [Section 1082] in the case of a government official's conduct that exceeds his authority, that exception is of no avail here." Id. Plaintiffs have not alleged that Secretary Riley failed to perform his enumerated functions, but rather that in the performance of these functions he unlawfully violated a number of nondiscretionary rules and regulations. "A government official's illegal action is not ipso facto beyond his delegated authority," Canterbury (Sacramento), supra, at 8 (citing Larson, supra, 337 U.S. at 695), and "the availability of injunctive relief does not hinge on [the court's] view of the proper exercise of otherwise-legitimate powers." Gross, supra, at 408. Even assuming that all of plaintiffs' allegations are true and that the Secretary did violate nondiscretionary duties, such violations would at most constitute a wrongful exercise of his proper administrative functions; they would not rise to the level of acts committed outside of his authority. Accordingly, although the Secretary's decision to suspend the plaintiffs from the FFEL programs may be set aside following judicial review pursuant to the APA, it cannot be suspended or reversed by means of injunctive relief.
Volges recognized that the anti-injunction provision of the FIRREA is "but part of a broader scheme" designed "to prevent courts from interfering with the RTC in the exercise of its statutory powers." Volges, supra, at 52. While the requirements of the RTC differ from those of the Department of Education, particularly with regard to the need for expeditious action, the general principle espoused in Volges is equally applicable here. Section 1082 protects the Secretary from judicial interference in his management of the FFEL programs. Although plaintiffs' administrative appeals in this case are complete, the issuance of an injunction by this Court would intrude upon the discretion of the Secretary by compelling him to underwrite debts which, by his own determination, bear an unacceptable risk of default. More broadly, under plaintiffs' proposed construction of Section 1082, every final decision to suspend a school from FFEL programs would potentially be subject to immediate judicial review, based on any number of alleged regulatory violations by the Secretary, with attendant injunctive relief prohibiting the termination of loan guarantees. Such a result "would render the anti-injunction clause a nullity and sovereign immunity meaningless. It is contrary to both law and logic to suggest that the government is protected from injunctions only so long as there is no violation to enjoin." Canterbury (Sacramento), supra, at 8. Accordingly, this Court finds that injunctive relief is precluded by the plain language of Section 1082 of the HEA.
Plaintiffs also contend that the result reached by this Court will deprive them of due process of law because they will be left without any effective remedy against illegal actions by the Secretary. That argument is unavailing. Plaintiffs have not been left procedurally helpless by the preclusion of injunctive relief. In addition to pursuing administrative appeals, they may litigate final decisions by the Secretary under the Administrative Procedures Act, pursuant to which they may be entitled to declaratory relief. See Thomas v. Bennett, supra, at 1168 (8th Cir. 1988); Student Loan Marketing Ass'n v. Riley, 907 F. Supp. 464, 474 (D.D.C. 1995).
Notwithstanding plaintiffs' contentions to the contrary, declaratory relief is not an illusory remedy. A judicial ruling which sets aside an administrative decision has the direct and immediate effect of changing the CDR status of the affected institution, without an injunction being necessary. To find otherwise--that is, to adopt plaintiffs' contention that injunctive relief must be made available in challenges to final agency decisions--would cause Section 1082 to mean something it does not say, and would eviscerate the congressional policy of preventing judicial interference by injunction in the administration of the Higher Education Act.
Further support for this conclusion may be found in the 1993 amendments to the HEA. Prior to 1993, the HEA required the Secretary to exclude all improperly serviced or collected loans before publication of a school's cohort default rate, but did not provide schools with a right of appeal to correct violations of this rule. In 1993, however, the HEA was amended to provide for a guaranteed administrative appeal, and - significantly - to permit schools to remain eligible to participate in the programs during the pendency of the entire appeal process. Virtually all of the cases in which injunctions were issued arose prior to the 1993 amendments. In light of the amendments, any need for judicial intervention by means of injunction has been alleviated, and indeed plaintiffs have pointed to no post-1993 case in which an injunction has been granted over jurisdictional objections.
For the reasons set forth above, plaintiffs' motion for a preliminary injunction is denied.
DATED: New York, New York
September 30, 1996
Sidney H. Stein, U.S.D.J.
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