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Ninth Circuit gives Betsy DeVos a pass on deposition in student debt relief case

Despite agreeing that evidence of bad faith by the Education Department exists, the appeals court found the former secretary likely doesn't possess necessary information that could not be obtained elsewhere.

SAN FRANCISCO (CN) — A federal judge made a big mistake when he ordered former U.S. Education Secretary Betsy DeVos to testify in a class action over long delays and mass denials of student debt relief claims, a divided Ninth Circuit panel ruled Friday.

“Although granting this request is an extraordinary action, so too is compelling the testimony of a cabinet secretary about the actions she took as a leader in the executive branch,” U.S. Circuit Judge Milan Smith, a George W. Bush appointee, wrote for the majority in a 28-page opinion Friday.

DeVos was ordered to testify in a class action claiming her policies permanently damaged the finances of student borrowers defrauded by for-profit colleges. In a decision authorizing her deposition this past May, U.S. District Judge William Alsup found evidence of bad faith in the agency’s stated reasons for an 18-month pause in processing debt relief claims. Alsup found that and other factors created an "extraordinary circumstance" that justified making the former secretary sit down for a three-hour deposition.

The Ninth Circuit panel’s majority concluded that even though DeVos is no longer a cabinet member, the reasoning that cautions against making high-ranking executive branch officials answer questions in court still applies.

“The threat of having to spend their personal time and resources preparing for and sitting for depositions could hamper and distract officials from their duties while in office,” Smith wrote. “If allowed the minute cabinet secretaries leave office, overwhelming and unnecessary discovery could also discourage them from taking that office in the first place or leaving office when there is controversy.”

In a sharply worded dissent, Senior U.S. Circuit Judge Richard Paez, a Bill Clinton appointee, argued that no other court has found the factors that urge against making cabinet officials testify apply equally to former department heads.

“Neither the majority, nor the government, nor former Secretary DeVos has identified any essential governmental duties that she would be distracted from by having to prepare and sit for a three-hour deposition,” Paez wrote.

DeVos’ testimony was sought in a class action brought by lead plaintiff Theresa Sweet in 2019. The lawsuit claims the Trump administration’s “pause” in processing borrower defense claims became a “policy of inaction and obfuscation” that prevented defrauded students from obtaining debt relief as required by law. The borrowers argued that long delays left more than 160,000 students “in limbo,” damaged their credit and permanently delayed their accumulation of wealth.

A new phase of evidence-gathering started in the case after Judge Alsup rejected a proposed settlement to end the lawsuit. The deal was torpedoed after borrowers complained the department was using boilerplate letters to deny the vast majority of long-pending debt relief claims.

Alsup weighed three factors when he denied the Biden administration’s request to quash a subpoena for DeVos' testimony. Those factors include whether the department acted in bad faith, whether the secretary has “unique and relevant firsthand knowledge” and whether that information can be obtained through “other less burdensome or intrusive means.” Alsup found all three factors weighed in favor of making DeVos sit down for a deposition.

The Ninth Circuit panel’s majority agreed with Alsup’s finding of “bad faith” by the department. Alsup noted that the department used “perfunctory denial notices utterly devoid of meaningful explanation” to reject 94% of 78,400 claims over the course of a few months in 2020. He found those actions contradicted the departments’ prior justification for halting claims-processing for 18 months because it needed more time to “analyze the issues presented so that they can reach considered results.”

“We see no reason to question this finding of bad faith,” Smith wrote for the majority.

The majority disagreed with Alsup’s evaluation of two other factors, finding that he erroneously concluded DeVos possessed necessary and unique information relevant to the lawsuit.

“There is no indication that DeVos holds information that is essential to plaintiffs’ case or that is otherwise unobtainable,” Smith wrote.

U.S. Circuit Judge Jacqueline Nguyen, a Barack Obama appointee, joined Smith in the majority.

In his 16-page dissent, Paez insisted the plaintiffs adequately showed DeVos is the only person who could explain why the department stopped processing claims for months and then used boilerplate denial letters to reject the vast majority of borrower defense applications.

Four high-ranking Education Department officials were previously interviewed in depositions and reported those decisions came from higher-level department officials, whom they could not specifically identify.

“Those officials disclaimed the authority to make the decision to halt adjudication of the borrower defense applications, disclaimed knowledge of who made the decision, and testified that DeVos had the authority to make such a decision,” Paez wrote.

He argued it would be futile to make the plaintiffs seek additional discovery from other sources when the highest-ranking department officials already indicated those decisions came from the top.

In an emailed statement Friday, DeVos’ attorney Jesse Panuccio welcomed the majority's opinion.  

“We are pleased that the Ninth Circuit upheld the rule of law and vindicated the longstanding principle that vexatious depositions of cabinet secretaries are impermissible,” Panuccio said.

A U.S. Education Department spokesperson declined to comment.

Plaintiffs’ class attorney Margaret E. O'Grady of the Project on Predatory Student Lending at Harvard Law School did not immediately respond to a request for comment.

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