State of Nebraska v. Joseph Biden, Jr.

United States Court of Appeals
For the Eighth Circuit
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No. 22-3179
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State of Nebraska; State of Missouri; State of Arkansas;
State of Iowa; State of Kansas; State of South Carolina
Plaintiffs - Appellants
v.
Joseph R. Biden, Jr., in his official capacity as the President of the United States of
America; Miguel Cardona, in his official capacity as Secretary, United States
Department of Education; United States Department of Education
Defendants - Appellees
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Hamilton Lincoln Law Institute; Americans for Prosperity Foundation; New Civil
Liberties Alliance
Amici on Behalf of Appellants
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Appeal from United States District Court
for the Eastern District of Missouri
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Submitted: October 24, 2022
Filed: November 14, 2022
[Published]
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Before SHEPHERD, ERICKSON, and GRASZ, Circuit Judges.
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PER CURIAM.
Whatever the eventual outcome of this case, it will affect the finances of
millions of Americans with student loan debt as well as those Americans who pay
taxes to finance the government and indeed everyone who is affected by such far-
reaching fiscal decisions. As such, we approach the motion before us with great
care.
This case centers on the plaintiff States’ request to preliminarily enjoin the
United States Secretary of Education (“Secretary”) from implementing a plan to
discharge student loan debt under the Higher Education Relief Opportunities for
Students Act of 2003, Pub. L. No. 108-76, 117 Stat. 904 (codified at 20 U.S.C.
§§ 1098aa–1098ee) (“HEROES Act”). See Federal Student Aid Programs (Federal
Perkins Loan Program, Federal Family Education Loan Program, and William D.
Ford Federal Direct Loan Program), 87 Fed. Reg. 61,512, 61,514 (Oct. 12, 2022) (to
be codified at 34 C.F.R. pts. 674, 682, 685). The States contend the student loan
debt relief plan contravenes the separation of powers and violates the Administrative
Procedure Act because it exceeds the Secretary’s authority and is arbitrary and
capricious.
The district court denied the States’ motion for a preliminary injunction and
dismissed the case for lack of jurisdiction after determining none of the States had
standing to bring the lawsuit. Key to the district court’s rationale was its conclusion
that the State of Missouri could not rely on any harm the Missouri Higher Education
Loan Authority (“MOHELA”) might suffer on account of the Secretary’s
cancellation of debt. The States appealed and moved for a preliminary injunction
pending appeal. We grant the motion for the following reasons.
“In ruling on a request for an injunction pending appeal, the court must engage
in the same inquiry as when it reviews the grant or denial of a preliminary
injunction.” Walker v. Lockhart, 678 F.2d 68, 70 (8th Cir. 1982). This inquiry
includes “balancing the equities between the parties.” Id. We ask “whether the
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balance of equities so favors the movant that justice requires the court to intervene
to preserve the status quo until the merits are determined.” Glenwood Bridge, Inc.
v. City of Minneapolis, 940 F.2d 367, 370 (8th Cir. 1991) (quoting Dataphase Sys.,
Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc)). In circumstances
“where the movant has raised a substantial question and the equities are otherwise
strongly in his favor, the showing of success on the merits can be less.” Dataphase,
640 F.3d at 113; see also Fennell v. Butler, 570 F.2d 263, 264 (8th Cir. 1978) (“If
the balance tips decidedly towards the plaintiffs and the plaintiffs have raised
questions serious enough to require litigation, ordinarily the injunction should
issue.”).
The district court’s analysis began and ended with standing. Standing is a
threshold issue since it is essential to our jurisdiction. United States v. One Lincoln
Navigator 1998, 328 F.3d 1011, 1013 (8th Cir. 2003). We begin by examining the
standing of the State of Missouri and, like the district court, focus on MOHELA.
MOHELA’s unique mix of legal attributes and authority have led to differing
opinions as to whether it is an “arm of the state” of Missouri for purposes of being
entitled to sovereign immunity. The core issue before this court, however, is whether
the alleged harm from the Secretary’s debt discharge plan, considering the role of
MOHELA, is sufficient to meet the requirements for Article III standing for
Missouri.
The relationship between MOHELA and the State of Missouri is relevant to
the standing analysis. MOHELA was created by the General Assembly of Missouri.
See Mo. Rev. Stat. § 173.360. It is governed by a seven-member board composed
of five members appointed by the Governor of Missouri, as well as the Missouri
State Commissioner of Higher Education and a member of the Missouri State
Coordinating Board of Higher Education. Id. After its creation, the Missouri
General Assembly expanded MOHELA’s purpose to include “support[ing] the
efforts of public colleges and universities to create and fund capital projects.”
Id. Relatedly, the General Assembly established the Lewis and Clark Discovery
Fund (“LCD Fund”) from which the General Assembly may annually appropriate
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moneys for certain purposes, including “funding of capital projects at public colleges
and universities.” Id. § 173.392. Most significantly, Missouri law, id. § 173.385.2,
specifically directs MOHELA to distribute $350 million “into a fund in the State
Treasury” for this program. MOHELA FY 2022 Financial Statements, at 20,
available at https://tinyurl.com/4chp295x. MOHELA has met part of its obligation
to the State treasury, but the “remaining unfunded amount . . . was $105.1 million as
of June 30, 2022.” Id.
Given this statutory framework, MOHELA may well be an arm of the State
of Missouri under the reasoning of our precedent. See Pub. Sch. Ret. Sys. of Mo. v.
St. Bank & Trust Co., 640 F.3d 821, 826–27, 833 (8th Cir. 2011) (applying the test
to determine whether sovereign immunity applies and holding Missouri public
school employment retirement systems were arms of the state). In fact, a number of
district courts have concluded that MOHELA is an arm of the state. See, e.g., Good
v. U.S. Dep’t of Educ., No. 21-CV-2539-JAR-ADM, 2022 WL 2191758, at *4 (D.
Kan. June 16, 2022); Gowens v. Capella Univ., Inc., No. 4:19-CV-362-CLM, 2020
WL 10180669, at *4 (N.D. Ala. June 1, 2020); see also In re Stout, 231 B.R. 313,
316–17 (Bankr. W.D. Mo. 1999). But see Dykes v. Mo. Higher Educ. Loan Auth.,
No. 4:21-CV-00083-RWS, 2021 WL 3206691, at *4 (E.D. Mo. July 29, 2021);
Perkins v. Equifax Info. Servs., LLC, No. SA-19-CA-1281-FB (HJB), 2020 WL
13120600, at *5 (W.D. Tex. May 1, 2020).
But even if MOHELA is not an arm of the State of Missouri, the financial
impact on MOHELA due to the Secretary’s debt discharge threatens to
independently impact Missouri through the LCD Fund. It is alleged MOHELA
obtains revenue from the accounts it services, and the total revenue MOHELA
recovers will decrease if a substantial portion of its accounts are no longer active
under the Secretary’s plan. This unanticipated financial downturn will prevent or
delay Missouri from funding higher education at its public colleges and universities.
After all, MOHELA contributes to the LCD Fund but has not yet met its statutory
obligation.
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Due to MOHELA’s financial obligations to the State treasury, the challenged
student loan debt cancellation presents a threatened financial harm to the State of
Missouri. See Dep’t of Com. v. New York, 139 S. Ct. 2551, 2566 (2019); Czyzewski
v. Jevic Holding Corp., 137 S. Ct. 973, 983 (2017). Consequently, we conclude
Missouri has shown a likely injury in fact that is concrete and particularized, and
which is actual or imminent, traceable to the challenged action of the Secretary, and
redressable by a favorable decision. Missouri, therefore, likely has legal standing to
bring its claim. And since at least one party likely has standing, we need not address
the standing of the other States. See Nat’l Wildlife Fed’n v. Agric. Stabilization &
Conservation Serv., 955 F.2d 1199, 1203 (8th Cir. 1992). Likewise, we need not
decide whether the Secretary’s standing argument as to harm alleged to Arkansas
and Nebraska is actually better viewed as a mootness argument. See West Virginia
v. EPA, 142 S. Ct. 2587, 2607 (2022) (discussing the importance of the distinction
and the heavy burden of establishing mootness once a live case has allegedly become
moot due to voluntary cessation of conduct).
Having addressed the threshold standing issue, we turn to the balancing of the
equities and the probability of success on the merits. Not only do the “merits of the
appeal before this court involve substantial questions of law which remain to be
resolved,” Walker, 678 F.2d at 71, but the equities strongly favor an injunction
considering the irreversible impact the Secretary’s debt forgiveness action would
have as compared to the lack of harm an injunction would presently impose. Among
the considerations is the fact that collection of student loan payments as well as
accrual of interest on student loans have both been suspended. We conclude “the
equities of this case require the court to intervene to preserve the status quo pending
the outcome” of the States’ appeal, id., and that the States have satisfied the standard
for injunctive relief pending review, see D.M. by Bao Xiong v. Minn. State High Sch.
League, 917 F.3d 994, 999−1001 (8th Cir. 2019) (discussing the standard for
preliminary injunctive relief).
Finally, we have carefully considered the Secretary’s request that we limit the
scope of any temporary relief. “Crafting a preliminary injunction is an exercise of
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discretion and judgment, often dependent as much on the equities of a given case as
the substance of the legal issues it presents.” Trump v. Int’l Refugee Assistance
Project, 137 S. Ct. 2080, 2087 (2017) (per curiam). As the Supreme Court has
explained, “one of the ‘principles of equity jurisprudence’ is that ‘the scope of
injunctive relief is dictated by the extent of the violation established, not by the
geographical extent of the plaintiff class.’” Rodgers v. Bryant, 942 F.3d 451, 458
(8th Cir. 2019) (quoting Califano v. Yamasaki, 442 U.S. 682, 702 (1979)). Part of
our consideration is whether the injunctive relief is “no more burdensome to the
defendant than necessary to provide complete relief to the plaintiffs,” Madsen v.
Women’s Health Ctr., Inc., 512 U.S. 753, 765 (1994), and “workable,” North
Carolina v. Covington, 137 S. Ct. 1624, 1625 (2017) (per curiam).
We conclude that, at this stage of the litigation, an injunction limited to the
plaintiff States, or even more broadly to student loans affecting the States, would be
impractical and would fail to provide complete relief to the plaintiffs. MOHELA is
purportedly one of the largest nonprofit student loan secondary markets in America.
It services accounts nationwide and had $168.1 billion in student loan assets serviced
as of June 30, 2022. See Rodgers, 942 F.3d at 458. Given MOHELA’s national role
in servicing accounts, we discern no workable path in this emergency posture for
narrowing the scope of relief. And beyond Missouri, tailoring an injunction to
address the alleged harms to the remaining States would entail delving into complex
issues and contested facts that would make any limits uncertain in their application
and effectiveness. Although such complexities may not counsel against limiting the
scope of an injunction in other contexts, here the Secretary’s universal suspension
of both loan payments and interest on student loans weighs against delving into such
uncertainty at this stage.
We GRANT the Emergency Motion for Injunction Pending Appeal. The
injunction will remain in effect until further order of this court or the Supreme Court
of the United States.
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