U.S. Supreme Court Cites Agency 3d

Associate Justice Amy Coney Barrett, concurring with the majority in Biden v. Nebraska, No. 22-506 (June 30, 2023), quoted Restatement of the Law Third, Agency § 2.02 in arguing that the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 provided no indication that Congress empowered the Secretary of Education to forgive billions of dollars’ worth of federal student-loan debts owed by millions of borrowers.

In August 2022, to address the financial harms of the COVID-19 pandemic, the Secretary of Education issued a proposal that invoked the HEROES Act to cancel or reduce federal student-loan debt for most borrowers. Specifically, the Secretary’s plan would modify the provisions of two statutory sections of the Higher Education Act of 1965 and three related regulations governing student loans to, among other things, discharge the balance of certain federal student loans in an amount up to $10,000 per person for borrowers with an adjusted gross income below $125,000, and up to $20,000 per person for borrowers who previously received Pell Grants. The Secretary’s plan would impact approximately 43 million borrowers and cancel an estimated $430 billion in debt.

Six states moved for a preliminary injunction, claiming that the plan exceeded the Secretary’s statutory authority. Although the U.S. District Court for the Eastern District of Missouri initially dismissed the suit based on its conclusion that none of the states had standing to challenge the Secretary’s plan, the U.S. Court of Appeals for the Eighth Circuit issued a nationwide preliminary injunction pending resolution of appeal, concluding that one of the states—Missouri—likely had standing through the Missouri Higher Education Loan Authority (MOHELA), a public corporation that held and serviced student loans.

As a preliminary matter, the U.S. Supreme Court agreed that Missouri had standing, because the Secretary’s plan harmed MOHELA in the performance of its responsibilities, thereby directly harming Missouri, which created and controlled MOHELA. Turning to the merits of the case, the Supreme Court held that, while the HEROES Act allowed the Secretary “to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act,” it did not allow the Secretary “to rewrite that statute from the ground up.”

Chief Justice John G. Roberts, delivering the opinion of the Court, explained that the ‘“economic and political significance’ of the Secretary’s action [wa]s staggering by any measure.” The Secretary’s plan would impact an estimated 98.5% of all borrowers and completely discharge the loans of roughly half of all federal student-loan borrowers. In addition, the cost to taxpayers—estimated to be between $469 billion and $519 billion—would amount to “nearly one-third of the Government’s $1.7 trillion in annual discretionary spending.” In contrast, the Secretary’s previous “waivers and modifications” issued under the HEROES Act prior to the COVID-19 pandemic “implemented only minor changes, most of which were procedural.” Justice Roberts reasoned that the Secretary’s modifications “were not ‘moderate’ or ‘minor,’” but, rather, “created a novel and fundamentally different loan forgiveness program.” Simply put, “the HEROES Act provide[d] no authorization for the Secretary’s plan even when examined using the ordinary tools of statutory interpretation—let alone ‘clear congressional authorization’ for such a program,” and the Court’s precedent required “that Congress speak clearly before a Department Secretary [could] unilaterally alter large sections of the American economy.” The Court accordingly reversed the judgment of the District Court, remanded for further proceedings, and denied the Government’s application to vacate the Eighth Circuit’s injunction as moot.

In a concurring opinion, Justice Barrett quoted Restatement of the Law Third, Agency § 2.02(1) and Comment e in arguing by analogy to principles of agency law that an agent had “actual authority to take action designated or implied in the principal’s manifestations to the agent,” and whether the agent’s understanding was reasonable depended on the context in which the principal and agent interacted, including their prior dealings, industry customs and usages, and the nature of the principal’s business or personal situation. While agencies were capable of making highly consequential decisions, Justice Barrett reasoned that “an initiative of this scope, cost, and political salience [wa]s not the type that Congress lightly delegate[d] to an agency”; rather, the Court ‘“expect[ed] Congress to speak clearly if it wishe[d] to assign to an agency decisions of vast ‘economic and political significance.’” Here, “the HEROES Act provide[d] no indication that Congress empowered the Secretary” to adopt his proposed loan cancellation program, and the “indicators” that were present “demonstrate[d] that the Secretary ha[d] gone far ‘beyond what Congress could reasonably be understood to have granted’ in the HEROES Act.”

Read the full opinion: Biden v. Nebraska, No. 22-506 (June 30, 2023).