[00:00:01] Speaker 01:
Sorry, Your Honor.

[00:00:02] Speaker 01:
The United States Court of Appeals is now in session.

[00:00:08] Speaker 04:
Okay.

[00:00:10] Speaker 04:
This is the time set for the oral argument on the government's emergency motion under Circuit Rule 27.3 for a stay pending appeal.

[00:00:23] Speaker 04:
And the time by which you've requested that we roll is March 26.

[00:00:30] Speaker 04:
So government council, you may proceed.

[00:00:38] Speaker 01:
Thank you, your honor, and may it please the court, Sean Janda for the government.

[00:00:41] Speaker 01:
I'll endeavor to reserve three minutes of my time for rebuttal.

[00:00:47] Speaker 01:
So I think it might be helpful to start by walking through some areas on both the facts and the law, on which I don't think there's any meaningful dispute between us and the plaintiffs.

[00:00:56] Speaker 01:
And so starting with the facts, first, I don't think there's any dispute

[00:00:59] Speaker 01:
that the department has really engaged in substantial efforts in this case to get relief out to the many, many class members who are entitled to that relief.

[00:01:10] Speaker 01:
Over the last three years, the department has sent out $12 billion in relief to nearly 300,000 borrowers in sort of the first two tranches of the settlement.

[00:01:19] Speaker 01:
And that's been an effort that is required, I think as the court can imagine, a substantial amount of work on the part of the department.

[00:01:27] Speaker 01:
And then second, I don't think there's any dispute about the consequences of enforcing the January deadline in this case by the department's calculations that would involve sending more than $11 billion in refunds and discharges to the post-class applicants who's claimed- Council, is that accurate, that figure you just said?

[00:01:47] Speaker 04:
Because my understanding is that you would be discharging loans that are at risk at best, and that's your alleged 11 billion number.

[00:01:57] Speaker 04:
And that in actuality, the number of funds is 640 million, refunds is 640 million?

[00:02:06] Speaker 01:
So the top line number, I think is certainly accurate.

[00:02:09] Speaker 01:
We're talking about 11 billion in discharges and refunds combined.

[00:02:15] Speaker 04:
It's the actual amount of discharges that we're talking about here.

[00:02:21] Speaker 01:
So it's substantially less than that.

[00:02:23] Speaker 01:
The 640, I think actually overstates it a little bit, that the 640 million came from the department's estimates of kind of the entire January tranche.

[00:02:35] Speaker 04:
It is true, is it not, that you would not necessarily, the government would not necessarily be paid the full amount of the loans.

[00:02:47] Speaker 04:
In fact, these are very risky loans because of the nature of

[00:02:53] Speaker 04:
the schools that they attended and many of them didn't get the employment that they thought they were going to be getting.

[00:03:00] Speaker 04:
So these are very at risk loans.

[00:03:05] Speaker 01:
Yes, look, I don't know at the end of the day, if all of these loans were not discharged, sort of how much money the department would ultimately be able to collect from these borrowers.

[00:03:15] Speaker 01:
But I think we're all in agreement that the $11 billion is the number.

[00:03:20] Speaker 00:
Okay, just to jump in real quick.

[00:03:22] Speaker 00:
I mean, if you were going to try to sell these loans on the open market, you would not get dollar, dollar, $11 billion.

[00:03:28] Speaker 00:
Right, you might get

[00:03:29] Speaker 00:
20 to 30%.

[00:03:30] Speaker 00:
I don't know.

[00:03:31] Speaker 00:
I mean, I think that I understand there's a technical number of 11 billion, but when you come out and say it's 11 billion, it's like 11 billion in coupons.

[00:03:41] Speaker 00:
It's not 11 billion in real money.

[00:03:44] Speaker 00:
And that's one of the things I think we have to assess when we're trying to see if the judges dare abuse their discretion or not.

[00:03:49] Speaker 00:
So I think you have to give us a little leeway here on the number.

[00:03:51] Speaker 00:
I appreciate the technical numbers, 11 billion.

[00:03:54] Speaker 00:
I don't think anyone in the private equity market would buy these loans for

[00:03:58] Speaker 00:
$11 billion, is that fair?

[00:04:00] Speaker 01:
Yes, I don't think we're disputing that.

[00:04:01] Speaker 01:
I mean, I think you're talking about hundreds of millions in refunds, which is cash out the door.

[00:04:06] Speaker 01:
And then on the discharges, I mean, even if it's 20% of 11 billion, that's a lot of money for the government.

[00:04:14] Speaker 03:
What was the government's plan before it got the money, the funding, the big bill?

[00:04:23] Speaker 03:
Was the plan to just simply

[00:04:25] Speaker 03:
not process these and to automatically give people relief?

[00:04:31] Speaker 01:
Yeah, I mean, I think the day before we got the money from Congress, there was no way the department was going to be able to meet its obligations.

[00:04:38] Speaker 01:
And I think at that point, because it didn't have the resources to develop a plan to ask for a reasonable extension, it was willing to take

[00:04:47] Speaker 01:
that the medicine provided for in the settlement.

[00:04:49] Speaker 01:
I think once the department got the money from Congress, that significantly changed things for the department because it allowed the department to develop the plan to hire, I mean, hundreds.

[00:04:58] Speaker 03:
Why did the two district courts abuse their discretion given just the fact that the government was aware for the whole period really that there was going to be about 200 plus people in this post-class group?

[00:05:13] Speaker 01:
Yeah, so I think there's two sort of fundamental errors in the district court's opinion that they would establish the abuse of discretion that the court might be looking for.

[00:05:21] Speaker 01:
I mean, number one, I think the district court says three separate times in the December opinion, in the oral ruling, that the district court believed that the department actually could meet the deadline and could adjudicate 170,000 applications in the six weeks remaining before the deadline.

[00:05:38] Speaker 04:
Council, but isn't that because as Judge Alsop said,

[00:05:43] Speaker 04:
You, I don't know if you personally, but someone in the government kept saying, we're on track, we're on the way, we're going to get it done.

[00:05:52] Speaker 04:
And so that's why District Court Judge Elsa believed that you could get it done because you were, counsel was telling them all along it would be getting done.

[00:06:04] Speaker 01:
So I think there's two things, Ron.

[00:06:05] Speaker 01:
I mean, number one, I think if you actually look at the statements that he references, they are really not saying that we're going to adjudicate the applications.

[00:06:12] Speaker 01:
They're saying we're aware of our obligations.

[00:06:15] Speaker 01:
And as I said to Judge Bress, I think before the department got the money from Congress, it just knew that there was no way it was going to make any reasonable.

[00:06:24] Speaker 04:
Why didn't the department then go and alert Judge Elsev if they knew they weren't going to

[00:06:32] Speaker 04:
get it done?

[00:06:33] Speaker 04:
Why didn't they go in earlier and say, we cannot do this instead of waiting till December?

[00:06:41] Speaker 01:
I think at the rate that the department was processing applications before it got the infusion of additional money from Congress, it would have taken somewhere between 10 and 15 years to complete the applications.

[00:06:57] Speaker 01:
And I think the department reasonably understood

[00:07:00] Speaker 01:
that it would have been a waste of everyone's time to go back to the plaintiffs or the district court and ask for a 10-year extension or a 15-year extension to allow it to complete the applications.

[00:07:11] Speaker 01:
Instead, I think once the department got the money, that was what allowed it to develop the much more reasonable request for an 18-month extension rather than sort of 10 years or 15 years.

[00:07:22] Speaker 01:
What is entailed in processing, especially the exhibit C,

[00:07:27] Speaker 03:
group because I understand that's the biggest percentage of these of these post-class members but the exhibit see you know schools seem to be but there's a more established record is to the issues with them so why would it take what's involved in processing those applications?

[00:07:48] Speaker 01:
I mean I think it's extremely intensive your honor

[00:07:50] Speaker 01:
And let me say a few things about it.

[00:07:51] Speaker 01:
Number one is the exhibit see folks who were actually part of the class got automatic relief.

[00:07:56] Speaker 01:
And the upshot of that was that when the department was processing those applications, it wasn't developing the factual record that we need to develop now because it wasn't.

[00:08:05] Speaker 04:
So I think you have a misstatement in there because isn't it true that both Judge Alsop?

[00:08:12] Speaker 04:
Well, it's a term in the settlement agreement that the post class, which is a misnomer, people are part of the class.

[00:08:21] Speaker 01:
So I think, and this is a very important point, I think that is just flatly incorrect.

[00:08:25] Speaker 01:
I will point the court to the settlement agreement itself, which we have in our appendix.

[00:08:31] Speaker 01:
And if you look at, sorry, one second.

[00:08:35] Speaker 01:
Appendix 156.

[00:08:38] Speaker 01:
What the settlement agreement says is the class is closed as of the execution date.

[00:08:42] Speaker 01:
The post class applicants are people who submitted their applications after the execution date that they are absolutely carved out.

[00:08:50] Speaker 04:
The class is closed because I'm looking at.

[00:08:54] Speaker 04:
The settlement agreement is, I guess it's bait stamped at 161.

[00:09:01] Speaker 04:
It's section D. I don't know what that says.

[00:09:05] Speaker 04:
If an individual submits a borrowed defense application after the execution date, i.e.

[00:09:11] Speaker 04:
the date the class closes, but before the final approval date, such individual is a post-class applicant.

[00:09:19] Speaker 04:
Defendants will issue a final decision on the merits no later than 36 months after the effective date.

[00:09:26] Speaker 04:
In making these decisions, it goes on.

[00:09:29] Speaker 04:
And so both Judges Alsop and Judge

[00:09:35] Speaker 04:
Gilliam made a finding of fact that in fact the post-class applicants were going to be paid the same as the class and that they're part of the class as in both of their decisions.

[00:09:51] Speaker 01:
Yes, I'll say I don't number one.

[00:09:53] Speaker 01:
I don't think it's a finding of fact at all.

[00:09:55] Speaker 01:
I mean, I think that's a legal conclusion and it's just not well founded.

[00:09:59] Speaker 01:
I think if you look at the settlement, you can ask plaintiffs about this.

[00:10:02] Speaker 01:
I think plaintiffs would tell you the clear intent of the settlement is to carve the post-class applicants out of the class to close the class as the settlement says.

[00:10:11] Speaker 03:
I guess the bigger question to me though is what is the relevance of this point for what you're asking for?

[00:10:17] Speaker 03:
So I mean you claim they're not part of the class, but nonetheless

[00:10:20] Speaker 03:
the government does intend to process their applications and to pay the ones who are deserving.

[00:10:24] Speaker 03:
And so why does this distinction matter if they're part of the class just in terms of where we are today?

[00:10:31] Speaker 01:
Yeah, so I think the distinction is extremely relevant.

[00:10:34] Speaker 01:
And it's because under the principles articulated by the Supreme Court in CASA, when the district court or when this court is exercising equitable authority in determining whether the equities support applying the deadline

[00:10:46] Speaker 01:
as in the agreement without the modification, the preeminent worry for the court has to be the interests of the parties to the case.

[00:10:55] Speaker 01:
And the parties to this case are the group one and two applicants, the members of the class that the government I think has really done a remarkable job of getting relief out to.

[00:11:05] Speaker 03:
If you were here arguing that these post-class people just should not be entitled to anything whatsoever, I would

[00:11:12] Speaker 03:
then I would understand there's a huge issue as to whether they're entitled to any relief at all.

[00:11:17] Speaker 03:
But aren't we at the point now where your clients agreed to give them relief?

[00:11:23] Speaker 01:
We certainly agreed to give them relief, Your Honor, and I think that's absolutely true, and the government can agree on a settlement to give relief to sort of third-party beneficiaries, which I think is what the government did here.

[00:11:35] Speaker 01:
But then when doing the Rule 60B analysis, the relevant question is whether the equities support prospectively applying the judgment, which in this case includes the settlement as incorporated into the judgment, and in doing that equitable analysis.

[00:11:49] Speaker 01:
And I don't think plaintiffs really dispute this,

[00:11:51] Speaker 01:
In doing that equitable analysis, the court has to be guided by CASA, which means that to the extent of the post-class applicants are not actually plaintiffs, then their interests just don't carry the same weight in the equitable analysis.

[00:12:04] Speaker 01:
To get back to the earlier answer, I think it's the second fundamental problem with Judge Alsop's

[00:12:10] Speaker 01:
original decision in December is he gave the interest of the post-class applicants full weight in the equitable balancing, even though they are, I think, plainly carved out of the plaintiff class.

[00:12:24] Speaker 04:
Just to go back to basics, while you're still here, what exactly are you asking us to stay?

[00:12:35] Speaker 01:
We are asking the court primarily to stay the January 28th, 2026 deadline contained in the settlement agreement and incorporate into the final judgment for adjudicating the post-class applications.

[00:12:46] Speaker 04:
And now how can we stay that?

[00:12:48] Speaker 04:
Because that is in effect modifying a term in the original settlement agreement.

[00:12:55] Speaker 01:
Correct.

[00:12:56] Speaker 01:
So the settlement agreement is incorporated into the final judgment.

[00:12:59] Speaker 01:
The district court retained jurisdiction over the settlement agreement.

[00:13:03] Speaker 01:
And so this court and the Supreme Court have a number of cases.

[00:13:05] Speaker 01:
Some of them we cite in our briefs.

[00:13:07] Speaker 01:
Kelly against Wengler is one that we cite.

[00:13:09] Speaker 01:
Horn from the Supreme Court.

[00:13:11] Speaker 01:
when a district court incorporates a settlement into a final judgment, the settlement is treated sort of as part of a court order and subject to sort of modification and enforcement, just like a court order is.

[00:13:22] Speaker 04:
And so- So is the government currently in contempt of the district court's order?

[00:13:30] Speaker 01:
No, Your Honor.

[00:13:31] Speaker 01:
I mean, there's actually two things.

[00:13:32] Speaker 01:
Number one is the

[00:13:36] Speaker 01:
Settlement says that if we don't meet the deadline, we then have to provide notice within 60 days and then relief a year after that.

[00:13:42] Speaker 01:
And so the notice deadline is coming up next week.

[00:13:47] Speaker 04:
So what is the emergency?

[00:13:49] Speaker 01:
Yeah, so the emergency, Your Honor, as we explained in the motion, is that the notice deadline, which starts the clock on having to provide full relief to the nonparties, is March 30th.

[00:14:01] Speaker 04:
That's the notice, but the real deadline is a year after that.

[00:14:05] Speaker 01:
Correct, but as we explained in our motion to process relief for 200,000 applications, which I think cover something like a million loans, it's going to take the department the entire year.

[00:14:17] Speaker 01:
And so the department soon after sending the notice is going to have to start sending out the discharges and refunds if it doesn't receive relief.

[00:14:25] Speaker 03:
Under the settlement agreement after you provide the March notice, are you

[00:14:30] Speaker 03:
After you provide a notice, are you essentially bound to the payment or to the relief, or can there still be adjudications after March?

[00:14:39] Speaker 01:
So I think under the terms of the settlement without modification, once we missed the January deadline, we are required to provide full relief.

[00:14:48] Speaker 01:
That's why we need relief from the court.

[00:14:49] Speaker 01:
So even if we were to do adjudications in the meantime and find that they were not meritorious applications, we would still be required to provide relief.

[00:14:57] Speaker 01:
And then, as I said, just as a practical matter, once the one year clock starts ticking, the department needs to start processing the relief and sending it out the door.

[00:15:06] Speaker 01:
If we were to ultimately win on appeal, not having received emergency relief in the meantime,

[00:15:13] Speaker 01:
be in a position to try to claw back relief we've already given.

[00:15:16] Speaker 01:
I think that would be a pretty tricky thing to do.

[00:15:18] Speaker 01:
And so that's why we're asking for relief on the front end to stop the clock from starting to tick.

[00:15:23] Speaker 03:
As the government is processing these applications, what are reasons why they're denied?

[00:15:27] Speaker 01:
I think the government would have a lot of different reasons.

[00:15:32] Speaker 01:
I mean, some may be that there's no misrepresentation.

[00:15:37] Speaker 01:
either on the face of the application or that the evidence developed by the department doesn't support the idea or the conclusion that the particular school engaged in a misrepresentation.

[00:15:48] Speaker 01:
There may also be not just denials, but sort of partial relief.

[00:15:52] Speaker 01:
If the department determines that an applicant is not entitled to kind of a full refund and discharge, that sort of may be a sort of partial denial or partial grant.

[00:16:05] Speaker 01:
But I think it would depend on the particular application.

[00:16:09] Speaker 01:
If there are no further questions, I see I've used all of my time.

[00:16:12] Speaker 04:
So I'll give you some time to, for rebuttal.

[00:16:15] Speaker 04:
Thank you, your honor.

[00:16:18] Speaker 04:
Okay.

[00:16:18] Speaker 04:
Ms.

[00:16:18] Speaker 04:
Ellis, or is it Ms.

[00:16:20] Speaker 02:
Ellis?

[00:16:20] Speaker 02:
Yes.

[00:16:21] Speaker 02:
It is.

[00:16:21] Speaker 02:
Yes.

[00:16:22] Speaker 02:
Thank you, your honor.

[00:16:22] Speaker 02:
And may it please the court.

[00:16:24] Speaker 02:
I'm Rebecca Ellis from the project on predatory student lending representing the plaintiff appellees.

[00:16:29] Speaker 02:
I'd like to pick up with the question of what exactly the government is asking for in relief here.

[00:16:37] Speaker 02:
And as my colleague explained, what they're looking for is a stay of the January 28th, 2026 decision deadline.

[00:16:48] Speaker 02:
So to begin with, the date has passed.

[00:16:51] Speaker 02:
It's not clear how they can ask for a stay of something that has already happened.

[00:16:55] Speaker 02:
But moreover, this is a motion for a stay pending appeal.

[00:17:00] Speaker 02:
The appeal here is of the district courts, December 11th,

[00:17:03] Speaker 02:
2025 and February 24th, 2026 orders.

[00:17:08] Speaker 02:
It is not and it cannot be an appeal of the final judgment in this case that incorporated the party settlement agreement because that judgment is more than three years old.

[00:17:19] Speaker 02:
The deadline for appealing it passed on January 28th, 2023.

[00:17:25] Speaker 02:
The department did not appeal the judgment at the time.

[00:17:28] Speaker 02:
They knew at that time how many post-class applicants there were, but they did not appeal the judgment.

[00:17:34] Speaker 02:
They did not appeal Judge Alstub's finding.

[00:17:37] Speaker 03:
The judgment was just the settlements essentially put into the judgment?

[00:17:41] Speaker 02:
Yes, Your Honor.

[00:17:43] Speaker 02:
Okay.

[00:17:43] Speaker 02:
Yes, the settlement is incorporated into the final judgment.

[00:17:46] Speaker 02:
And the department did not object or appeal at that time to Judge Alsop's finding that post-class members are members of the class.

[00:17:57] Speaker 02:
And that was not, you know, merely some throwaway line in the final judgment.

[00:18:01] Speaker 02:
We had interveners in this case who opposed final approval.

[00:18:05] Speaker 02:
One of those interveners raised the exact argument that the government is raising today, that post-class applicants are not class members.

[00:18:12] Speaker 02:
Judge Alsop considered that argument

[00:18:15] Speaker 02:
decided it was incorrect held that post class members are members of the class.

[00:18:20] Speaker 02:
So, and the government has treated post class members as such, ever since they've reported data to us on the post class they've issued decisions under the settlement.

[00:18:31] Speaker 02:
And so,

[00:18:33] Speaker 02:
it is very hard to see how it could possibly have been an abuse of discretion for Judge Alsop and Judge Gilliam to consider the equities involved for the post-class members here and to stick to that law of the case that they are class members.

[00:18:50] Speaker 02:
Now, regardless of whether you term them class members or not, I think Your Honor's correctly recognized that

[00:19:00] Speaker 02:
The government owes certain responsibilities to post-class members under the settlement.

[00:19:06] Speaker 02:
That's not in question.

[00:19:08] Speaker 02:
They must provide decisions by a certain date.

[00:19:11] Speaker 02:
That date, at least for post-class exhibit C members under Judge L's order, was January 28th, 2026.

[00:19:19] Speaker 02:
The government did not appeal the December 11th order after it issued.

[00:19:24] Speaker 02:
They did not seek a stay in the district court or any other sort of temporary or emergency relief after that order.

[00:19:31] Speaker 02:
The government conceded in allowing the January 28th deadline to pass.

[00:19:36] Speaker 02:
And the settlement and Judge Alsop's order were in full force and effect on that date.

[00:19:42] Speaker 02:
So as a result, as of today,

[00:19:44] Speaker 02:
Post-class exhibit C members who did not receive a decision by January 28th have a binding contractual right to full settlement relief.

[00:19:55] Speaker 02:
What the government is asking the court to do here today is really quite extraordinary in that they're asking for this court on an emergency basis, not even on a fully developed record, to rewrite the party settlement agreement to say,

[00:20:14] Speaker 03:
What do you make of the government's argument that there are people who are filing applications who shouldn't actually receive relief if we were to go through and properly adjudicate them?

[00:20:26] Speaker 02:
Well, Your Honor, I would say that the government had three years to adjudicate those applications.

[00:20:31] Speaker 02:
And furthermore, there actually is a provision in the settlement agreement that would have allowed them to try to change the post class deadline.

[00:20:40] Speaker 02:
And I would point the court to the government's appendix.

[00:20:47] Speaker 02:
It's paragraph 5D5 of the settlement and that is on page.

[00:20:54] Speaker 02:
Sorry, let me just.

[00:20:56] Speaker 02:
Scroll to it, that is on page 169 to 170 of the settlement agreement.

[00:21:03] Speaker 02:
And this paragraph says, if defendants are reasonably prevented from or delayed and fully performing any of the obligations set forth in paragraph four above, which includes post-class decisions,

[00:21:14] Speaker 02:
due to extraordinary circumstances beyond defendant's control, defendants will notify plaintiff's counsel within 14 calendar days of defendant's determination that they will not be able to fully perform their obligations.

[00:21:28] Speaker 02:
And then the paragraph goes on to describe a meet and confer process.

[00:21:32] Speaker 02:
And if the meet and confer fails, then it provides that the plaintiffs can raise a claim of anticipatory breach

[00:21:41] Speaker 02:
which the defendants can then oppose on the grounds of extraordinary circumstances, and the court can at that point determine whether defendants are entitled to an extension of the deadline.

[00:21:53] Speaker 02:
So at any time from final approval through November 2025, when they filed their Rule 60B motion, the defendants could have invoked this provision.

[00:22:04] Speaker 02:
They could have approached the plaintiffs and said,

[00:22:07] Speaker 02:
We don't have enough money.

[00:22:08] Speaker 02:
We don't believe we're going to be able to meet this deadline.

[00:22:12] Speaker 02:
We need an extension.

[00:22:13] Speaker 02:
But they never did.

[00:22:15] Speaker 02:
And instead, they did repeatedly say, we understand the deadline.

[00:22:19] Speaker 02:
We know the deadline is coming.

[00:22:21] Speaker 03:
How about after the time period after the big bill was enacted?

[00:22:27] Speaker 02:
No, Your Honor, they still did not invoke this provision after the big bill was enacted.

[00:22:31] Speaker 02:
And in fact, in their first 60B motion before Judge Alsop, the defendants included a footnote in their brief, essentially saying, we don't think we have to follow this provision.

[00:22:42] Speaker 02:
We have an independent right to seek 60B relief, so we're not going to do the contractual remedy that's available to us.

[00:22:50] Speaker 03:
Why is that?

[00:22:51] Speaker 03:
Because the contractual remedy expired by that point?

[00:22:54] Speaker 02:
No, the contractual remedy absolutely was available.

[00:22:58] Speaker 02:
They just didn't want to do it.

[00:23:00] Speaker 02:
I mean, you can ask my colleague what his view is on why they didn't do it, but it was absolutely available to them at the time.

[00:23:11] Speaker 03:
So is it still available to them now then?

[00:23:14] Speaker 02:
Well, now the deadline has passed.

[00:23:16] Speaker 02:
So I would say they would not be able to seek a delay of the deadline that has already passed.

[00:23:24] Speaker 02:
There is still one more deadline left, which is April 15th, a deadline to make decisions on post-class non-Exhibit C applications.

[00:23:34] Speaker 02:
I suppose this paragraph would still apply if the government wanted to approach us about an inability to meet that deadline.

[00:23:41] Speaker 04:
But that is... So what's the number of Exhibit C... There are Exhibit C

[00:23:55] Speaker 04:
I guess debtors versus non-exhibit C debtors of the remaining loans.

[00:24:06] Speaker 02:
Roughly it's 170,000 exhibit C people and 20,000 non-exhibit C. Those are estimates, but it's in that ballpark.

[00:24:17] Speaker 04:
Okay.

[00:24:18] Speaker 04:
So of the 11 billion number that's being talked about here,

[00:24:25] Speaker 04:
How much money are we talking about in discharges?

[00:24:33] Speaker 02:
Well, Your Honor, if we assumed that the debt load is roughly equally distributed across members of the post class, you'd be looking at around

[00:24:51] Speaker 02:
mental math, right?

[00:24:54] Speaker 02:
I don't know the exact percentages.

[00:24:56] Speaker 02:
It would be, you know, roughly the proportion.

[00:25:01] Speaker 04:
I understand, you know, obviously this emergency motion, so I'm not going to say completely understand every aspect of this case, but I do understand that the exhibit C debtors are for schools that essentially state

[00:25:20] Speaker 04:
attorney generals have already found that these schools made misrepresentations.

[00:25:26] Speaker 04:
So I don't know what's left for the government to do before discharging those loans.

[00:25:34] Speaker 02:
I think that's right, Your Honor.

[00:25:35] Speaker 02:
These are schools that the government agreed in the course of the settlement have substantial indicia of widespread misconduct.

[00:25:42] Speaker 02:
And in fact, we know that there are about 30,000 out of those 170,000 whose schools

[00:25:48] Speaker 02:
engaged in such widespread misconduct that the department has separately, outside of these suite proceedings, has separately said all loans from those schools will be canceled, at least within certain defined periods of time.

[00:26:03] Speaker 03:
So those- The government says, well, there's still work to do to evaluate.

[00:26:09] Speaker 03:
What do you make of that?

[00:26:11] Speaker 03:
What does the record show on that?

[00:26:14] Speaker 02:
Your honor, I think the record shows that there is significant common evidence for these exhibit C schools.

[00:26:21] Speaker 02:
And so all that would be left to do in our view, or all that was left to do before the deadline was for the government to see whether those applications described misconduct of a type that we know occurred.

[00:26:40] Speaker 02:
So for instance, for many schools, there's widespread evidence that they misrepresented their job placement rates.

[00:26:47] Speaker 02:
They would say 90% of our graduates get a job.

[00:26:50] Speaker 02:
It turns out only 30% of their graduates got a job.

[00:26:54] Speaker 02:
So then if someone submitted an application and said, this school lied to me about job placement rates, in our view, there's not much left to do.

[00:27:01] Speaker 02:
That's stating a borrower defense to repayment that is,

[00:27:06] Speaker 02:
that is supported by significant evidence that already exists.

[00:27:11] Speaker 02:
Now, I'm certainly not saying you can't approve a borrowed defense application unless you have this widespread evidence, but for Exhibit C schools, that evidence does exist.

[00:27:22] Speaker 02:
The department has it.

[00:27:23] Speaker 02:
That's why they agreed to Exhibit C in the settlement in the first place.

[00:27:30] Speaker 03:
How many schools in Exhibit C still exist?

[00:27:34] Speaker 03:
I know there's been some bankruptcies.

[00:27:37] Speaker 02:
I don't have an exact number for you.

[00:27:39] Speaker 02:
There's a significant number of Exhibit C schools that are closed.

[00:27:43] Speaker 02:
Either they went bankrupt or they closed not in bankruptcy or they split programs off for parts.

[00:27:56] Speaker 02:
I don't have an exact percentage for you, but it is a significant number of those schools that no longer exist.

[00:28:04] Speaker 02:
And many of the largest schools no longer exist.

[00:28:07] Speaker 02:
We have large numbers of applicants, for instance, from ITT Technical Institute that went bankrupt in 2016.

[00:28:14] Speaker 02:
I do want to address

[00:28:25] Speaker 02:
the issue, going back to Judge Wardlaw's question about the amount of the discharges, we did submit

[00:28:37] Speaker 02:
evidence and argument below about why we believe that this amount is inflated.

[00:28:44] Speaker 02:
That would be at pages 73 to 78 of plaintiff's supplemental appendix, including GAO report, which states that the Education Department can actually expect to lose $9 for every $100 of student loans dispersed.

[00:29:02] Speaker 02:
So what we're talking about here

[00:29:04] Speaker 02:
is not really $11 billion.

[00:29:06] Speaker 02:
What we're talking about is some much smaller percentage of $11 billion that will be potentially collected over perhaps the next 30 years.

[00:29:18] Speaker 02:
We already know that at least those 30,000 people from the schools that have received group discharges are going to get their loans discharge.

[00:29:27] Speaker 02:
In any event, there are certainly many more people in that group who are going to qualify for public service loan forgiveness, who are going to pay for 20 years and then get an income-driven repayment discharge, who already have total and permanent disabilities.

[00:29:47] Speaker 02:
The number is not accurate.

[00:29:51] Speaker 02:
We do not agree that the number is accurate, but also we do not agree that the number is relevant.

[00:29:58] Speaker 02:
The government agreed to this settlement three years ago.

[00:30:03] Speaker 02:
It is fair to hold them to their word.

[00:30:09] Speaker 04:
In assessing the equities, can you please describe the harms to the people whose loans have not been discharged?

[00:30:17] Speaker 02:
Absolutely, Your Honor.

[00:30:18] Speaker 02:
So the government states that those people's loans can remain in forbearance.

[00:30:22] Speaker 02:
That is generally true, although due to various issues with loan servicers, it is not always true.

[00:30:30] Speaker 02:
But even for the people whose loans are in forbearance, these loans have absolutely wrecked their credit.

[00:30:36] Speaker 02:
And you'll see in the evidence that we put in below, which is in our supplemental appendix, we have class members who have lost their cars, they've lost their housing, they have illnesses that they have trouble paying for.

[00:30:50] Speaker 02:
And even beyond the effect on their credit, it has an effect on people's

[00:30:59] Speaker 02:
mental and emotional well-being.

[00:31:01] Speaker 02:
This case has always been about the government's unreasonable delay in dealing with these applications.

[00:31:09] Speaker 02:
The people in the post-class applied in 2022.

[00:31:11] Speaker 02:
They've already been waiting for a decision for almost four years, and they had this date on their calendar.

[00:31:19] Speaker 02:
You know, they thought, even if I get denied, at least it will be over by January 28th, 2026.

[00:31:26] Speaker 02:
And to have that rug pulled out from under them is gravely injurious to the class.

[00:31:34] Speaker 02:
I see that my time is up, so if there are no further questions, I'll step back.

[00:31:40] Speaker 04:
All right, Mr. Is it Janda?

[00:31:43] Speaker 01:
Janda, Your Honor.

[00:31:44] Speaker 04:
Mr. Janda, I'll give you a minute to respond to anything

[00:31:50] Speaker 04:
Great, thank you.

[00:31:52] Speaker 01:
I mean, just very briefly, number one, on the question of whether we should have used the contractual remedy provision, I will point the court to Appendix 53.

[00:32:00] Speaker 01:
Originally, plaintiffs moved to strike our motion saying we should have gone through the contractual remedy provision on Appendix 53.

[00:32:06] Speaker 01:
They withdrew that motion, I think, for the quite practical reason that it doesn't make any sense to sort of

[00:32:13] Speaker 01:
adjudicating effectively this question about whether we're entitled to an extension another two months or a year or whatever it's going to take to go through that process.

[00:32:20] Speaker 01:
Number two, just in terms of the last three years.

[00:32:23] Speaker 03:
Hold on a second.

[00:32:24] Speaker 03:
You're moving quickly.

[00:32:27] Speaker 04:
You don't have to talk that quickly.

[00:32:30] Speaker 03:
Going back to that, so I just want to make sure I understand.

[00:32:32] Speaker 03:
So there's a contractual provision that Miscellus pointed to and the government didn't invoke it.

[00:32:39] Speaker 03:
Why?

[00:32:40] Speaker 01:
Uh, we did not believe that the contractual provision precluded, um, seeking world 60 relief, uh, because, um, but that doesn't mean you.

[00:32:49] Speaker 03:
You couldn't have sought relief under the contract.

[00:32:52] Speaker 03:
You just chose not to.

[00:32:53] Speaker 01:
I think we could have stopped relief under the contract, although.

[00:32:57] Speaker 01:
I think the primary difference is there we've been a long meeting confer process, and then we've been having anticipatory motion from plaintiffs that we would have then responded to.

[00:33:06] Speaker 01:
I think that we've been effectively the same issues the court we've been adjudicating, which is why plaintiffs withdrew their objection to the way that we went about the process.

[00:33:14] Speaker 01:
Again, the appendix 53.

[00:33:15] Speaker 01:
I think we just wanted a determination from the court about whether we have to send this relief out or whether we can move forward with the plan of adjudicating these applications over the next year and a half.

[00:33:25] Speaker 04:
If you had done what you agreed to do, which is provide 14 days notice, we wouldn't be here right now, would we?

[00:33:32] Speaker 01:
I think we would, Your Honor.

[00:33:37] Speaker 04:
We might be in a place where the district court judge gave you an extension because you could show the government was acting reasonably and as quickly as it could or whatever.

[00:33:54] Speaker 04:
That was a way that you could have worked it out and modified your agreement without filing sort of a motion where you have to show that there's some sort of extraordinary circumstances beyond your control to get relief.

[00:34:14] Speaker 01:
I don't think that's right, Your Honor.

[00:34:15] Speaker 01:
I think the contractual provision requires effectively the same showing.

[00:34:19] Speaker 01:
And I would be stunned to learn the plaintiffs would tell you that they would have agreed to a modification if we had gone to them instead of filing the Rule 60 motion.

[00:34:26] Speaker 01:
I think that's why they withdrew their motion to strike at the hearing.

[00:34:30] Speaker 01:
I think they understood that there's really no practical difference between proceeding through the contractual provision and proceeding through Rule 60B.

[00:34:39] Speaker 01:
The ultimate question is whether the equities support extending or modifying this deadline.

[00:34:43] Speaker 04:
Do you agree that would have been a way where you would end up in front of the district court judge in a way where you could effectively renegotiate your settlement agreement?

[00:34:55] Speaker 04:
Whereas now you just let the deadlines pass and you can't renegotiate now.

[00:35:02] Speaker 04:
And district court also did grant you some relief with respect to some part of the post-class.

[00:35:11] Speaker 04:
Now the time for negotiating is over.

[00:35:16] Speaker 01:
Again, I don't think that we've been productive in any way.

[00:35:19] Speaker 01:
I think it's pretty clear what the plans you and the district reports view would have been.

[00:35:23] Speaker 01:
It's really the same question.

[00:35:25] Speaker 01:
And again, if this report denies that, we may well just have been here and I think it would have been effectively the exact same arguments we would be making here.

[00:35:35] Speaker 01:
And then the other thing I would say very briefly, if I may, is in terms of what the department's been doing for the last 3 years, I think it's important to understand that as soon as the department realized that this group of applications was many times larger than it thought it would be.

[00:35:48] Speaker 04:
Three years ago, you knew the number was 205,000, right?

[00:35:53] Speaker 01:
Correct.

[00:35:54] Speaker 01:
In the department's next budget request in 2023, it went to Congress and tried to get more money.

[00:35:59] Speaker 01:
Again, I think it's pretty hard for plans to complain that we tried to solve the problem that way rather than trying to solve the problem by getting out of the agreement three years ago.

[00:36:08] Speaker 01:
I think the department was trying to do everything it could to get the resources it needed to solve this problem.

[00:36:13] Speaker 01:
It took three budget cycles for Congress to finally give the department the additional money in July after rejecting requests twice.

[00:36:22] Speaker 01:
But I don't know that it would be better for anyone if the department had tried to get out of the settlement three and a half years ago, rather than trying to get the money from Congress to allow it to adjudicate the claims.

[00:36:34] Speaker 01:
Again, it turns out not by the deadline, but I think with a quite reasonable extension of the deadline.

[00:36:41] Speaker 04:
All right.

[00:36:42] Speaker 04:
Thank you, counsel.

[00:36:43] Speaker 04:
Thank you.

[00:36:43] Speaker 04:
There are no further questions.

[00:36:46] Speaker 04:
Okay.

[00:36:48] Speaker 04:
Sweet versus McMahon.

[00:36:50] Speaker 04:
will be submitted and this session of the court is adjourned for today.

[00:36:54] Speaker 01:
This court for this session stands adjourned.