COVID-19 Summary: This is an action filed in response to the CARES Act and an interim final rule from the Department of Education regarding how funds could be distributed between private and public schools. The court granted a preliminary injunction prohibiting enforcement of the interim final rule on August 26, 2020. On November 9, the court approved a permanent injunction that prohibited the defendants from implementing the interim rule and from taking any action inconsistent with the proportional share formula provided by Congress. The court retained jurisdiction over the case for enforcement purposes.
This lawsuit arose out of the funding provisions for elementary and secondary schools in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020. Filed by eight states (California, Michigan, Hawaii, Maine, Maryland, New Mexico, Pennsylvania, and Wisconsin), Washington D.C., and four school districts (Chicago, Cleveland, New York City, and San Francisco), the lawsuit challenged a July 1, 2020 interim final rule from the Department of Education about how the funds may be distributed between private and public schools.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 was passed on March 27, 2020 to provide trillions of dollars in financial relief, and other assistance, to Americans suffering from the effects of the coronavirus pandemic. The CARES Act set aside approximately $16 billion to help elementary and secondary schools, particularly those schools with low-income students. The money was to be allocated based on the amount of Title I funding each state and school district received in the most recent year. Private schools were eligible to receive funds in certain circumstances consistent with established Title I criteria-the number of children from low-income families who attend the school.
The Department of Education issued non-binding guidance on April 30, 2020 directing that private schools should get a share of CARES Act money based on their overall student population not just their number of low-income students. Widespread pushback followed, but nonetheless, on July 1, 2020, the Department published an interim final rule instructing that CARES Act money be apportioned to private schools based on the number of all children enrolled, not just low income children, or apportioned based on low-income private school children and incur poison pill requirements on how the public school share of the money may be used.
In response, Michigan, California, Washington D.C., Maine, New Mexico, and Wisconsin filed this lawsuit against the Secretary of Education (Betsy Devos) and the Department of Education in the U.S. District Court for Northern District of California on July 7, 2020. The plaintiffs argued that the rule exceeded the Department's authority, was not in accordance with the governing law, violated separation of powers principles, and violated the Constitution's spending clause. In addition, the states argued that the rule violated the Administrative Procedure Act (APA) because the Department acted arbitrary and capricious and bypassed notice and comment procedures required by the APA. The plaintiffs sought attorneys' fees and costs, a declaration that the July 1 rule and the April 30 guidance document are unlawful, and preliminary and permanent relief preventing the Department from enforcing the rule. On July 17, 2020, the plaintiffs amended the complaint to add additional states (Hawaii, Maryland, and Pennsylvania) and four school districts (Chicago, Cleveland, New York City, and San Francisco) as plaintiffs. The case was assigned to Judge James Donato.
With the school year approaching, the plaintiffs filed a motion for a preliminary injunction barring enforcement of the rule on July 20, 2020, arguing that the rule threatens imminent and irreparable harm to to schools and students across the country. The plaintiffs stressed that as a result of the rule, public schools would lose CARES Act funding in contradiction to Congress intent. The court held a hearing on the preliminary injunction on August 18, 2020.
On August 26, 2020 Judge Donato granted a preliminary injunction against the rule. 2020 WL 5074397 (Aug. 26, 2020).
Michigan v. DeVos, --- F.Supp.3d ---- (2020). Judge Donato explained that the plaintiffs were likely to succeed on their claim rule was an unlawful action under the APA because it exceeded the Department's authority. Congress's intent was plain and clear that the funds should be distributed according to formula in Section 1117 of the Elementary and Secondary Education Act which is based on the number of low-income families who attended private schools. Judge Donato called the Department's argument for the rule "'interpretive jiggery-pokery' in the extreme," and questioned why Congress would include Section 1117, if it did not intend the formula to be used: "If Congress did not mean to use the formula in Section 1117, wouldn't it simply have omitted any reference to it in the first place? But since Congress expressly referred to Section 1117, what exactly does the Department think that means?"
On October 9, the Department of Education issued new guidance that replaced the rule.
On November 6, the defendants consented to the entry of a permanent injunction that prevented the defendants from implementing the April 30 guidance and taking any action inconsistent with the proportional share formula in Section 1117 or other restrictions or penalties on the use of CARES Act funds. The defendants waived their rights to seek reconsideration of or appeal of the decision.
On November 9, the court approved the permanent injunction and issued a judgment on November 11. The court retained jurisdiction over the case for enforcement purposes.
Emily Kempa - 09/07/2020
Chandler Hart-McGonigle - 11/30/2020
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