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The Hoosier attorney who sued to stop the federal student loan forgiveness program received a lesson in litigation from the federal judge presiding over the case: Don’t sue the wrong defendant.
Frank Garrison, an attorney with the Pacific Legal Foundation who resides in Indiana, filed a lawsuit against the U.S. Department of Education on the basis that the student loan debt cancellation plan injured him. Specifically, he said he would have to pay state income taxes on the $20,000 of relief he would have received.
However, Indiana Southern District Court Judge Richard Young dismissed the case without prejudice on Oct. 21, finding that neither Garrison nor his co-plaintiff, Noel Johnson, had Article III standing.
The 13-page ruling in Garrison and Johnson v. U.S. Department of Education, et al., 1:22-cv-01895, pointed out the plaintiffs would have been harmed by Indiana’s law, which would have levied a tax on the amount of debt that was canceled.
“But the Federal Government’s student loan relief program did not injure them,” Young wrote. “The State’s legislative decision did.”
According to the district court’s online docket, Garrison has filed a notice of appeal with the 7th Circuit Court of Appeals.
The dismissal was likely not a surprise, because after Garrison filed his complaint, the Education Department altered the program to allow borrowers to opt out and not receive any debt relief. Young had permitted Garrison to file an amended complaint but asked the attorney to consider whether he had standing now that participation in the student loan cancellation initiative is no longer automatic.
Garrison subsequently added Johnson as a co-plaintiff and filed his amended complaint Oct. 10. The document identifies Johnson as an individual living in the jurisdiction of the U.S. District Court for the Southern District of Indiana.
Like other lawsuits challenging the Biden administration’s student loan cancellation program, Garrison and Johnson argue the executive branch overstepped its authority. Only Congress has the power of the purse to provide debt relief to student borrowers, they say.
The district court was not convinced, holding the plaintiffs’ injuries were not traceable to the federal government.
Young cited Segovia v. United States, 880 F.3d 384 (7th Circ. 2018), as controlling in Garrison.
In Segovia, Congress enacted a law that required states to permit individuals in overseas territories to vote by absentee ballot. However, the law did not extend to Puerto Rico, Guam and the Virgin Islands.
Subsequently, Illinois excluded voters from those three territories. Plaintiffs challenged both the federal and state laws. The 7th Circuit found the federal law only provided a benefit while the Illinois law caused the actual harm.
The Indiana Southern District Court noted Garrison and Johnson tried to distinguish their situation from Segovia. They argued the Segovia plaintiffs were harmed “solely because of a state law decision permitted by federal statute,” but the injury in the debt relief case results from “the inevitable operation of state tax law” after the federal government cancels a portion of the loans.
Young found that argument “simply rephrases the point.”
“State tax law is a state decision permitted by federal law,” the judge wrote. “As Plaintiffs concede, the thrust of Segovia is that ‘state law inflicted the harm’ instead of federal law. That is true here as well: state tax burdens are solely a state law decision … .”
Another dismissal
The U.S. District Court for the Eastern District of Missouri, Eastern Division, dismissed another lawsuit last week that also challenged the student loan cancellation program.
Like Young, Judge Henry Edward Autrey found the plaintiffs lacked Article III standing.
Six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — filed their complaint Sept. 29 and, like Garrison, argued the Higher Education Relief Opportunities for Students Act of 2003, or HEROES Act, did not give the Biden administration the authority to enact “mass debt cancellation.”
An in-person hearing on the plaintiffs’ motion for preliminary injunction was held Oct. 12. The states had asserted the cancellation would cause them to lose revenue generated by the payments of the student loans.
Autrey issued his ruling in State of Nebraska, et al. v. Joseph R. Biden, Jr., et al., 4:22-cv-1040, on Oct 20. The court concluded the plaintiff states failed to establish standing because they did not show that they suffered an “injury in fact” and that the injury was traceable to the federal government.
Yet, the Missouri District Court was not unsympathetic to the plaintiffs.
“It should be emphasized that ‘standing in no way depends upon the merits of the Plaintiff[s’] contention that the particular conduct is illegal,’” Autrey wrote, citing Warth v. Seldin, 422 U.S. 490 (1975). “While Plaintiffs present important and significant challenges to the debt relief plan, the current Plaintiffs are unable to proceed to the resolution of these challenges.”
The plaintiffs appealed to the 8th Circuit Court of Appeals and filed an emergency motion for an administrative stay blocking the debt relief program. The 8th Circuit imposed a stay Oct. 21.
In an expedited briefing schedule, the appellate court ordered briefs to be filed by Oct. 25.
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