Schadenfreude and Third-Party Standing in the Student Debt Forgiveness Case

by Michael C. Dorf

Later this month, the Supreme Court will hear oral argument in two cases challenging the Biden administration's student debt forgiveness program: Dep't of Educ. v. Brown and Biden v. Nebraska. Each case presents a threshold question whether the respective respondents have standing as well as a merits question. Although the merits questions are worded a bit differently in each case, they boil down to the same basic objections: (1) that the HEROES Act, which the administration invoked as authority for the debt forgiveness plan, does not in fact authorize it because, say the respondents, most of the beneficiaries of the plan were "not placed in a worse position financially in relation to that financial assistance because of their status" as individuals affected by the national emergency of the COVID-19 pandemic; and (2) the adoption of the plan was procedurally flawed.

As I wrote in my Verdict column last week, the recent announcement of the Biden administration's intention to end the COVID-based national and public health emergencies puts the Solicitor General in a somewhat awkward position rhetorically but as a logical matter should not affect the merits. The national emergency first declared by the Trump administration and used initially by that administration as the basis for temporary cessation of student loan interest payment obligations was a valid exercise of the authority granted by the HEROES Act, and the effects of an emergency can linger after the emergency ends. The sticking point, as noted above, is just what those after-effects are--a question to which the end of the emergency is not really relevant. Even so, as I noted in the column, I would not be surprised if lawyers for the respondents invoke the impending end of the emergency to score points, nor would I be surprised if one or more Justices make the same contention.

Readers interested in the merits might wish to view my recent "debate" with Professor Ilya Somin about the case. (I put the word "debate" in quotation marks because it was more of a friendly discussion in which I agreed with some of what Prof Somin said and disagreed with other points.) Prof Somin's opening remarks focused mostly on the cases' merits, discussing standing only at the end, whereas my opening remarks were directed mostly to standing; in our second round and during the Q&A, we each addressed both standing and the merits. (Due to a technical glitch, the video cuts off the Introduction and starts about a minute into Prof Somin's remarks but is otherwise easy to follow.) In the balance of today's essay, I'll recap and further elaborate on a couple of points I made about standing.

Let's start with the individual case, Brown, which features two plaintiffs: Brown, the eponymous respondent, doesn't qualify for debt relief under the program because her debt is commercially held; Taylor, the other respondent, qualifies for $10,000 in debt relief but not for $20,000, because he was not a Pell Grant recipient. They complain that the program is invalid as beyond the scope of authority delegated by the HEROES Act. If they're right about that, however, the relief they seek--invalidation of the program--wouldn't benefit them. So it's hard to see why Brown and Taylor have standing to challenge the program.

But wait. Brown and Taylor complain that the program as structured is unfair. In general, leveling down (eliminating a benefit for everyone) can remedy inequality just as leveling up (extending the benefit) can. Indeed, in Heckler v. Mathews, SCOTUS held that a plaintiff has standing to bring an equal protection claim even if the only available remedy is leveling down, so that he cannot receive the benefit; nonetheless, a successful challenge will bring him equality. As I explained in this 2017 essay, that principle has an element of schadenfreude about it, but then equality itself has an element of schadenfreude about it. However, although their complaint contains statements objecting to the debt forgiveness program on fairness grounds, Brown and Taylor have not brought an equal protection claim. 

Perhaps Brown and Taylor could be said to have standing to bring their procedural challenge. They say that the administration failed to use the notice-and-comment procedure in violation of the Administrative Procedure Act; if it had, perhaps the program would have been structured differently to include Brown and/or to render Taylor eligible for more relief. Yet even that claim provides a highly dubious basis for standing. As the government brief explains (at pp 32-33), the procedural challenge is parasitic on the claim that the HEROES Act does not authorize the student debt forgiveness plan at all. So the only result of Brown and Taylor succeeding on their claims would be the complete invalidation of the program, which would not benefit them.

So much for the individuals' claims. What about the states? That same government brief does an excellent job showing why most of the states lack standing. The state with the strongest argument for standing (as tacitly acknowledged by the government brief and as claimed by Prof Somin during our conversation) is Missouri, which has created an entity with the acronym MOHELA, that earns processing fees for student loans; with less student debt, MOHELA will earn less in fees, which will in turn mean less money for Missouri.

The Solicitor General's core argument (at pp. 26-30 of her brief and divided into two parts that I'll summarize jointly) is that MOHELA is a separate corporate entity from the state of Missouri, even if MOHELA is legally indebted to Missouri so that a drop in MOHELA's revenue for loan-processing fees could thus mean less money for the state. The SG's brief responds that there is no authority for the proposition that "if A causes financial harm to B, and B owes money to C, C has standing to sue A." That's fair, but it leaves open the possibility that MOHELA itself would have standing if it sued on its own behalf, which I think is also wrong.  I'll explain my reasoning with a hypothetical case.

During the last six months of the Trump administration, the federal government executed thirteen people. That marked a dramatic change from previous decades. From 1960 to the present, with the exception of those thirteen executions, the federal government executed a total of four people. Suppose, however, that policy were to change and the government sought, obtained, and carried out many more death sentences--let's say 100 per year. Suppose further that the DeathChem corporation has an exclusive contract to supply the federal government with the lethal injection drug it uses to carry out executions. Now suppose that a new President is elected. She opposes the death penalty categorically and thus announces a new program called Commutation of Condemned Individuals (COCI) that in one fell swoop commutes the sentences of all federal death row inmates to life imprisonment. DeathChem sues the administration, claiming that the President's power to issue "reprieves and pardons" cannot be exercised categorically in this way but can only be used on a case-by-case basis. The claim should fail on the merits. After all, President Carter pardoned draft dodgers categorically. But it's my hypothetical, so I'll assume arguendo that there's more to the merits. Even so, should DeathChem have standing to challenge COCI?

Conventional wisdom would say that DeathChem has Article III standing because it suffers a pocketbook injury but that it should be denied so-called third-party standing under the general rule that parties may only bring their own claims. However, what counts as a disfavored third-party claim is somewhat murky where a party challenges a program or law on structural or procedural grounds. Thus, in Bond v. United States, SCOTUS held that a person charged with a crime has standing to challenge the law under which she is charged on federalism grounds even though she is an individual, not a state. Federalism, the Court said, exists ultimately to protect individuals as well as states. One can make a similar argument with respect to other structural and procedural doctrines and provisions.

But even acknowledging that structural protections exist to protect individuals, surely there is a limit to how far that principle extends. Bond herself had standing to object that the law that would apply to her exceeded the powers of Congress. But suppose that Bond's next-door neighbor wished to sue the government on the ground that if Bond went to prison, her house would be empty, which would create a greater risk of crime, which would lower the neighbor's property value. There are numerous objections one could make to such a suit, but one threshold objection ought to be that this simply isn't the kind of injury that counts--even if we assume that it's nearly certain to occur. Why not? Because the neighbor's expected pecuniary loss, even if substantial and nearly certain, has nothing to do with the alleged unconstitutionality of the statute as applied to Bond.

Justice Thomas's otherwise problematic dissent in June Medical v. Russo (problematic because, among other things, he refers to doctors who perform abortions as "abortionists") challenged the Court's treatment of the limits on third-party standing as merely prudential and thus subject to waiver by the courts and Congress. Third parties, Justice Thomas claimed, ipso facto lack Article III standing, not just prudential standing. To my mind he overstated both the support for his view in extant case law and the normative force of disallowing all third-party claims. However, I think he expressed the kernel of a sound proposition: so long as there are any constitutional standing limits at all, some people or entities are so removed from the alleged legal wrong they seek to challenge that they should be ineligible to complain--even if they meet the other requisites of Article III--and neither the Court nor Congress should be able to authorize them to sue.

We could characterize the non-standing of such intermeddlers in one of two ways. Influenced by Justice Thomas, we might say that Article III itself bars claims by the likes of DeathChem, Bond's neighbor, and MOHELA, even if it were to sue on its own behalf. Or we could say that such actors have Article III standing but that they are so removed from the legal wrong they allege that it should never be permissible for courts or Congress to lift the bar on prudential standing with regard to them. Given that Article III standing doctrine is itself a modern creation, the classification is going to be made up in any event.

Regardless of how one characterizes the matter, none of the parties challenging the debt forgiveness program should have standing. A SCOTUS committed to the principles it has articulated with regard to standing would so rule. I'm not holding my breath.