Court Opinion

ID: 9960722
Source: CourtListenerOpinion
Date Created: 2024-04-16 21:00:47.477734+00
Date Added: 2024-06-11T08:19:48.401357
License: Public Domain

USCA4 Appeal: 23-1414      Doc: 35            Filed: 04/15/2024   Pg: 1 of 6

                                               UNPUBLISHED

                                UNITED STATES COURT OF APPEALS
                                    FOR THE FOURTH CIRCUIT

                                                 No. 23-1414

        TODD BERMAN,

                     Plaintiff – Appellant,

        v.

        PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY, d/b/a
        FedLoan Servicing,

                     Defendant – Appellee.

        Appeal from the United States District Court for the Middle District of North Carolina, at
        Greensboro. Loretta C. Biggs, District Judge. (1:21-cv-00063-LCB-JLW)

        Submitted: February 29, 2024                                      Decided: April 15, 2024

        Before DIAZ, Chief Judge, and HARRIS and HEYTENS, Circuit Judges.

        Affirmed by unpublished opinion. Judge Heytens wrote the opinion, which Chief Judge
        Diaz and Judge Harris joined.

        ON BRIEF: Jonathan A. Vogel, VOGEL LAW FIRM PLLC, Charlotte, North Carolina,
        for Appellant. Christopher R. Healy, Philadelphia, Pennsylvania, Justin G. Weber,
        Harrisburg, Pennsylvania, Ethan J. Ostroff, TROUTMAN PEPPER HAMILTON
        SANDERS LLP, Virginia Beach, Virginia, for Appellee.

        Unpublished opinions are not binding precedent in this circuit.
USCA4 Appeal: 23-1414      Doc: 35        Filed: 04/15/2024     Pg: 2 of 6

        TOBY HEYTENS, Circuit Judge:

              Asserting its actions cost him the chance to have his student loans forgiven, Todd

        Berman sued the Pennsylvania Higher Education Assistance Agency. The district court

        concluded the Agency was entitled to derivative sovereign immunity and dismissed

        Berman’s complaint. We affirm.

              Berman obtained two student loans directly from the Department of Education. The

        Department contracted with the Agency to service certain loans. Among the Agency’s

        responsibilities was administering loans that might be eligible for cancellation under the

        Public Service Loan Forgiveness program, which requires borrowers to make ten years of

        payments while working for a qualifying public service employer. The Agency did so by

        processing employment certification forms submitted by borrowers and “notify[ing]” those

        borrowers of “the number of qualifying payments made while employed in qualifying

        public service.” JA 837.

              After spending four years in the United States Army (which all agree is a qualifying

        public service employer), Berman went to work for Blue Cross Blue Shield of North

        Carolina. This raised a question: Is Blue Cross also a qualifying public service employer?

              Unfortunately, Berman received conflicting answers to that question. Berman

        asserts that, until 2018, the Agency repeatedly told him his Blue Cross job qualified for

        loan forgiveness. In doing so, the Agency relied on then-existing guidance from the

        Department about a similar employer—Blue Cross Blue Shield of Rhode Island.

              By the time Berman submitted a second employment certification form, however,

        the Department had reversed course. In March 2018, the Agency sent Berman a letter

                                                    2
USCA4 Appeal: 23-1414      Doc: 35          Filed: 04/15/2024     Pg: 3 of 6

        stating that, “after consulting with the Department of Education,” it had determined that

        “BlueCross BlueShield of North Carolina does not provide a qualifying service as part of

        its primary purpose . . . and therefore cannot be approved under public health for [loan

        forgiveness] purposes.” JA 131. After receiving that letter, Berman consolidated his federal

        loans into private loans, which eliminated any possibility for loan forgiveness. A year later,

        however, the Department “reversed it[s] decision again” (JA 900), and the Agency told

        Berman that Blue Cross was a qualifying employer after all.

               Berman sued the Agency in federal district court, bringing four state law claims all

        stemming from the Agency’s assertedly “false representation” that Blue Cross was not a

        qualifying employer. JA 24. The district court dismissed Berman’s complaint for lack of

        subject matter jurisdiction, concluding the Agency was entitled to derivative sovereign

        immunity. See Cunningham v. General Dynamics Info. Tech., 888 F.3d 640, 649 (4th Cir.

        2018) (“[D]erivative sovereign immunity . . . confers jurisdictional immunity from suit.”). *

        Reviewing that conclusion de novo, see Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002),

        we see no error.

               The parties agree about the relevant legal framework. Under this Court’s precedent,

        “a government contractor” like the Agency “is not subject to suit if (1) the government”

        (here, the Department) “authorized the contractor’s actions and (2) the government validly

               *
                 Berman asserts derivative sovereign immunity is better understood as an
        affirmative defense that must be proven at trial. We need not consider the merits of that
        argument because “one panel cannot overrule another.” McMellon v. United States,
        387 F.3d 329, 333 (4th Cir. 2004) (en banc).

                                                      3
USCA4 Appeal: 23-1414       Doc: 35          Filed: 04/15/2024      Pg: 4 of 6

        conferred that authorization, meaning it acted within its constitutional power.”

        Cunningham, 888 F.3d at 643 (quotation marks and citation removed). Berman makes no

        argument about the second requirement. Instead, he trains his fire on the first element,

        insisting the Department did not, in fact, authorize the Agency’s allegedly wrongful

        actions. Like the district court, we are unpersuaded.

               Berman’s argument runs into two problems. First, the Department authorized the

        Agency’s actions by contract. See Cunningham, 888 F.3d at 648 (stating that the first step

        of the derivative sovereign immunity analysis is satisfied if a contractor “adhered to the

        terms of its contract with” the government). Under its contract with the Department, the

        Agency had to follow certain procedures for certifying private employers as eligible for

        public service loan forgiveness. Among the step-by-step instructions for “[v]erifying

        qualifying employment” was a requirement to “escalate” questions about whether a given

        private employer qualifies “to the Department for approval” and then “[s]end the Borrower

        a notification of the outcome of the review.” JA 851–53. That is precisely the approach the

        Agency followed here in issuing the March 2018 letter.

               In contrast, Berman urges an unnatural reading of the contract. The contract,

        Berman says, spoke only to how the Agency was to make an initial decision about whether

        a given employer qualified for loan forgiveness and was silent about how the Agency

        should go about “chang[ing] its prior determination.” Berman Br. 18. The parties spar over

        whether Berman preserved this argument in the district court, but we need not resolve that

        question because we conclude the argument fails on the merits. The distinction Berman

        seeks to draw has no basis in the contract’s text. It also cannot be squared with the contract’s

                                                       4
USCA4 Appeal: 23-1414      Doc: 35        Filed: 04/15/2024     Pg: 5 of 6

        requirement that, after a loan was transferred to the Agency from a different servicer—

        something that happened to Berman’s loans—the Agency was required to “track the

        number of . . . qualifying payments made after” the transfer (JA 140 (emphasis added)),

        including by reviewing an employer’s qualified status every time the Agency received an

        employment certification form.

              The second problem with Berman’s argument is that, even apart from the language

        of the contract, the Department expressly authorized the Agency’s challenged actions here.

        Cf. Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 166 (2016) (stating that derivative

        sovereign immunity does not apply “[w]hen a contractor violates both federal law and the

        Government’s explicit instructions”). Indeed, the Department told the Agency in February

        2018 that it was “approved to retract Blue Cross Blue Shield of North Carolina” from

        eligibility for public service loan forgiveness and even asked the Agency to “send . . . a

        copy” of the March 2018 retraction letter for it “to review before mailing.” JA 892. The

        Department similarly took responsibility for the decision the next year when it told the

        Agency that “the department has reversed its decision again” and asked if the Agency

        needed “help . . . with the draft response” notifying Berman about the flip-flop. JA 900.

        In short, the record makes clear that Department officials made the challenged decisions

        and told the Agency to communicate those decisions to Berman.

              We are unpersuaded by Berman’s argument that “emails” such as these cannot

        “provide the requisite government authorization” when a contract exists. Berman Reply

        Br. 10. To the contrary, this Court’s decisions suggest that even relying on a government

        official’s verbal authorization can be enough to confer derivative sovereign immunity to a

                                                    5
USCA4 Appeal: 23-1414        Doc: 35       Filed: 04/15/2024      Pg: 6 of 6

        government contractor. See Butters v. Vance Int’l, Inc., 225 F.3d 462, 466–67 (4th Cir.

        2000). We see no reason why the Agency could not rely on the Department’s written

        instructions here.

                                              *      *      *

               If there is a villain in this story, it is the Department—not the Agency. Berman might

        have sought to challenge the Department’s conclusion that Blue Cross Blue Shield of North

        Carolina was not a qualifying public service employer via an action under the APA.

        See, e.g., American Bar Ass’n v. United States Dep’t of Educ., 370 F. Supp. 3d 1, 26

        (D.D.C. 2019) (entertaining a similar action). But sovereign immunity always would have

        prevented Berman from suing the Department for money damages, and Berman may not

        evade that result by suing the Department’s agent instead. Indeed, the point of derivative

        sovereign immunity “is to prevent a government contractor from facing liability for” even

        wrongful conduct where that conduct was validly authorized by government officials.

        Cunningham, 888 F.3d at 648. The district court’s judgment is

                                                                                       AFFIRMED.

                                                     6