Court Opinion

ID: 2739222
Source: CourtListenerOpinion
Date Created: 2014-10-02 13:01:07.682218+00
Date Added: 2024-06-11T10:04:01.262782
License: Public Domain

UNITED STATES DISTRICT COURT
                         FOR THE DISTRICT OF COLUMBIA
__________________________________________
                                           )
ASSOCIATION OF PRIVATE SECTOR             )
COLLEGES AND UNIVERSITIES,                )
                                          )
                    Plaintiff,            )
                                          )
            v.                            )    Civil Action No. 14-277 (RMC)
                                          )
ARNE DUNCAN, Secretary,                   )
U.S. Department of Education, et al.,     )
                                          )
                    Defendants.           )
                                          )
__________________________________________)

                                           OPINION

               The D.C. Circuit remanded this matter to allow the Department of Education to

provide a reasoned explanation for two aspects of new rules that affect for-profit colleges and

universities. On remand, the Department supplemented the preamble to its regulations to comply

with the D.C. Circuit’s directives. The Association of Private Sector Colleges and Universities

now complains that the Department has once again failed to support its regulations with record

evidence and substantiated assertions. The Department of Education responds that its

supplemented preamble satisfies the Circuit’s limited remand. Both parties move for summary

judgment. For the reasons set forth below, the Court will grant Plaintiff’s motion.

                                           I. FACTS

   A. The Compensation Regulations

               Every year, Congress provides more than $150 billion in federal grants and loans

to institutions that enroll students in qualified educational programs. The Department of

Education (Department) administers these programs, which were established under Title IV of

                                                1
the Higher Education Act (HEA), Pub. L. No. 89–329, 79 Stat. 1219, 1232–54 (1965). The HEA

seeks to ensure that postsecondary institutions prepare students for graduation and employment,

and thereby increase the likelihood of student loan repayment. Thus, to participate in Title IV

programs, a postsecondary institution must satisfy several requirements to ensure that it meets

minimum quality standards before receiving federal funds. See 20 U.S.C. § 1094(a)

(establishing eligibility requirements for the receipt of Title IV funding).

               However, the Department believes that some institutions have evaded these

statutory requirements to secure funding irrespective of program quality. In particular, private-

sector colleges and universities have come under fire for questionable recruiting tactics that have

led to the enrollment of underqualified students who fail to secure adequate employment and are

therefore at heightened risk for student loan default. The Department seeks to curb these

practices by, among other things, eliminating certain forms of incentive-based compensation for

recruiting personnel. 1

               In 2009, the Department concluded that its existing compensation regulations

were susceptible to manipulation. Of relevance here, the Department amended its regulations

covering incentive-based compensation (Compensation Regulations) to eliminate safe harbors

which had allowed postsecondary institutions to circumvent the statutory ban on certain

incentive payments. See Ass’n of Private Sector Colls. & Univs. v. Duncan (APSCU), 681 F.3d
427, 434 (D.C. Cir. 2012) (citing 34 C.F.R. § 668.14(b)(22)).

1
 The HEA proscribes the payment of “any commission, bonus, or other incentive payment based
directly or indirectly on success in securing enrollments or financial aid to any persons or entities
engaged in any student recruiting or admission activities or in making decisions regarding the
award of student financial assistance . . . .” 20 U.S.C. § 1094(a)(20). For ease of reference, this
Opinion references all such personnel as “recruiting personnel.”
                                                  2
               Specifically, the Department amended its Compensation Regulations to prohibit

institutions receiving federal monies from offering “any sum of money or something of value,

other than a fixed salary or wages,” 34 C.F.R. § 668.14(b)(22)(iii)(A) (2011), “based in any part,

directly or indirectly, upon success in securing enrollments or the award of financial aid,” id.

§ 668.14(b)(22)(i). Under the new rule, a postsecondary institution could award merit-based

salary adjustments to its recruiting personnel, but only if the adjustments were not based “in any

part, directly or indirectly,” on a recruiter’s success in securing enrollments. See id. In addition,

the Compensation Regulations eliminated a safe harbor that had allowed schools to provide

incentive compensation “based upon students successfully completing their educational

programs or one academic year of their educational programs, whichever is shorter.” Id.

§ 668.14(b)(22)(ii)(E). The new rule therefore proscribed all forms of graduation-based

compensation for recruiting personnel. Finally, the Department eliminated a safe harbor that had

allowed schools to provide incentive-based compensation to “managerial or supervisory

employees who do not directly manage or supervise employees who are directly involved in

recruiting or admission activities, or the awarding of [T]itle IV, HEA program funds.” Id.

§ 668.14(b)(22)(ii)(G).

    B. Prior Litigation

               The Association of Private Sector Colleges and Universities (APSCU) is an

association that represents over 1,500 private-sector schools. On January 21, 2011, APSCU filed

suit to challenge the Compensation Regulations, among others, 2 under the Administrative

2
  In 2009, the Department of Education also promulgated standards for state authorizations of
postsecondary institutions (State Authorization Regulations) and created additional enforcement
options to remedy misrepresentations made by postsecondary institutions (Misrepresentation
Regulations). APSCU challenged specific provisions of these regulations in prior litigation. The
State Authorization Regulations and Misrepresentation Regulations are not at issue here.
                                                  3
Procedure Act (APA), 5 U.S.C. § 706, and the U.S. Constitution. This Court granted summary

judgment to the Department on APSCU’s claims concerning the Compensation Regulations. See

Career Coll. Ass’n v. Duncan, 796 F. Supp. 2d 108 (D.D.C. 2011).

               On appeal, the D.C. Circuit affirmed in part and reversed in part. With respect to

the Compensation Regulations, the D.C. Circuit held that the Department’s regulations provided

a permissible interpretation of the HEA’s prohibition on certain forms of incentive-based

compensation. However, the Circuit found two aspects of the Compensation Regulations

arbitrary and capricious for want of reasoned decision-making. First, the Circuit held that the

prohibition on graduation-based compensation was arbitrary and capricious “without some better

explanation from the Department.” APSCU, 681 F.3d at 448. The Circuit explained:

               Congress created the Title IV programs to enable more students to
               attend and graduate from postsecondary institutions. This specific
               safe harbor seems perfectly in keeping with that goal. Indeed, the
               elimination of this safe harbor could even discourage recruiters
               from focusing on the most qualified students.

               The Department offered a brief explanation for its elimination of
               this safe harbor . . . . [T]he Department points to nothing in the
               record supporting these assertions. It may well be that the
               Department actually eliminated this safe harbor based on the
               agency’s belief that institutions have used graduation rates as a
               proxy for recruitment numbers. But the Department never offered
               that explanation.

Id.

               Further, the D.C. Circuit held that the Department had failed to respond to

commenters’ concerns that the Compensation Regulations could have an adverse effect on

minority enrollment. In particular, two commenters asked the Department to address whether

the Compensation Regulations would apply to employees who were involved in recruiting

minority students and, specifically, whether the Department intended to foreclose an institution’s

                                                4
ability to compensate staff for recruiting students from disadvantaged backgrounds. The D.C.

Circuit noted:

                 [T]he Department stated that the Compensation Regulations apply
                 to all employees at an institution who are engaged in any student
                 recruitment or admission activity or in making decisions regarding
                 the award of [T]itle IV, HEA program funds. However, the
                 Department never really answered the questions posed by [the
                 commenters] because it failed to address the commenters’ concerns
                 . . . . [T]he agency’s failure to address these comments, or at best
                 its attempt to address them in a conclusory manner, is fatal to its
                 defense.

Id. at 449 (internal citations and quotation marks omitted).

                 The Circuit remanded these two portions of the Compensation Regulations to the

District Court, with instructions to remand to the Department to (1) explain its elimination of the

safe harbor for graduation-based compensation and (2) respond to commenters’ concerns about

the effects of the Compensation Regulations on diversity initiatives. Id. at 448–49. The

Compensation Regulations were remanded to the Department of Education on August 14, 2012.

   C. The Department’s Actions on Remand

                 On September 6, 2012, APSCU wrote a letter to Arne Duncan, Secretary of the

Department of Education, to encourage the Department to engage in further notice and comment

rulemaking to remedy the deficiencies identified by the Court of Appeals. The Department did

not respond to APSCU’s request. Instead, on March 22, 2013, the Department of Education

issued an amended preamble to further explain the reasons for its Compensation Regulations and

to address commenters’ concerns about the enrollment of minority students. See Program

Integrity Issues, 78 Fed. Reg. 17,598, 17,599, 17,600 (2013) (codified at 34 C.F.R.

§ 668.14(b)(22)).

                                                  5
               It is undisputed that the Department significantly expanded the number of reasons

supporting its prohibition on graduation-based compensation. However, the parties contest

whether the quality and logical force of those reasons are sufficient to comply with the D.C.

Circuit’s directives. With respect to the ban on graduation-based compensation, the Department

explained:

               [I]t is the Department’s experience that institutions use this safe
               harbor to provide recruiters with compensation that is indirectly
               based upon securing enrollments in violation of the HEA . . . . In
               other words, because a student cannot successfully complete an
               educational program without first enrolling in the program, the
               compensation for securing program completion requires the
               student’s enrollment as a necessary preliminary step.

78 Fed. Reg. 17,599 (citation and internal quotation marks omitted). In other words, because

enrollment is a “first” and “necessary” precursor to graduation, see id., the Department contends

that the HEA’s prohibition on enrollment-based compensation necessarily requires a total ban on

graduation-based compensation.

               The Department also referenced comments which had expressed concern that

“[t]he shorter the program, the more likely the student will complete the program, thus rewarding

enrollment and completion notwithstanding the student’s academic performance or the quality of

the program.” Id. Moreover, the Department mentioned its belief that graduation-based

compensation could incentivize recruiters to steer students to the shortest possible programs, or

contribute to “lowered admissions standards, misrepresented program offerings, lowered

academic progress standards, altered attendance records, and a lack of meaningful emphasis on

academic performance and program quality.” Id.

               In addressing concerns that the new regulations would curtail diversity initiatives,

the Department stated:

                                                6
               [T]he HEA prohibits all direct or indirect payments of incentive
               compensation to personnel or staff engaged in student recruitment
               and does not distinguish between incentives for personnel or staff
               recruitment actions that could have certain effects, e.g., recruitment
               of a well-qualified or diverse student body. The prohibition thus
               includes a prohibition on paying incentive compensation for efforts
               to promote diversity at an institution.

               ....

               The incentive compensation ban is designed, among other things,
               to keep students of all races and backgrounds from being urged or
               cajoled into enrolling in a program that will not best meet their
               needs. Minority and low income students are often the targeted
               audience of recruitment abuses, and our regulatory changes are
               intended to end that abuse.

78 Fed. Reg. 17,600.

    D. Procedural History

               APSCU filed the instant Complaint on February 21, 2014, alleging that the

Department had failed to respond adequately to the D.C. Circuit’s directives. See Compl.

[Dkt. 1] ¶ 37 (“At a minimum, the remand required the Department to supply a reasoned

justification, supported by citations to the administrative record, for prohibiting graduation-based

compensation and to respond to commenters’ concerns regarding the Compensation regulations’

effect on schools’ ability to assemble a diverse student body.”).

               The parties filed cross-motions for summary judgment on March 4, 2014. 3

APSCU argues that the Amended Preamble offers nothing more than recycled explanations,

additional verbiage, and unsupported speculation, and therefore fails to satisfy the D.C. Circuit’s

3
  APSCU’s Motion for Summary Judgment was originally filed as a “Motion for Further Relief”
in the prior case number. See Mot. for Further Relief, Career Coll. Ass’n v. Duncan, et al., Civ.
No. 11-138 (RMC) (D.D.C., Jan. 21, 2011), ECF No. 37. Because the motion challenged agency
action on remand, i.e., new agency action, at the parties’ agreement, APSCU filed a new
Complaint. Pursuant to the parties’ stipulation regarding case management, the cross-motions
for summary judgment were transferred to this case number on March 4, 2014.
                                                 7
instructions on remand. The Department responds that its additional statements and references to

comments in the administrative record satisfy the minimal burden imposed by the remand.

                                    II. LEGAL STANDARDS

   A. Federal Rule of Civil Procedure 56

               Under Federal Rule of Civil Procedure 56, summary judgment shall be granted “if

the movant shows that there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); accord Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 247 (1986). Moreover, summary judgment is properly granted

against a party who “after adequate time for discovery and upon motion . . . fails to make a

showing sufficient to establish the existence of an element essential to that party’s case, and on

which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317,

322 (1986).

               In ruling on a motion for summary judgment, the court must draw all justifiable

inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true.

Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than “[t]he mere

existence of a scintilla of evidence” in support of its position. Id. at 252. In addition, the

nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton,

164 F.3d 671, 675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that

would enable a reasonable jury to find in its favor. Id. If the evidence “is merely colorable, or is

not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249–50

(citations omitted).

                                                  8
   B. Administrative Procedure Act

               APSCU challenges the proposed Compensation Regulations, alleging that the

Department’s revised regulations are arbitrary and capricious for lack of adequate explanation.

The APA provides that a reviewing court must “hold unlawful and set aside agency action,

findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).

               In determining whether an agency’s action was arbitrary and capricious, a

reviewing court “must consider whether the [agency’s] decision was based on a consideration of

the relevant factors and whether there has been a clear error of judgment.” Marsh v. Or. Natural

Res. Council, 490 U.S. 360, 378 (1989) (internal quotation marks and citation omitted). “The

requirement that agency action not be arbitrary or capricious includes a requirement that the

agency adequately explain its result.” Pub. Citizen, Inc. v. Fed. Aviation Admin., 988 F.2d 186,

197 (D.C. Cir. 1993). An agency action usually is arbitrary or capricious if the agency has relied

on factors which Congress has not intended it to consider, entirely failed to consider an important

aspect of the problem, offered an explanation for its decision that runs counter to the evidence

before the agency, or is so implausible that it could not be ascribed to a difference in view or the

product of agency expertise. Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto.

Ins. Co., 463 U.S. 29, 43 (1983).

               As the Supreme Court has explained, “the scope of review under the ‘arbitrary

and capricious’ standard is narrow and a court is not to substitute its judgment for that of the

agency.” Id. Moreover, when an agency has acted in an area in which it has “special expertise,”

courts should be particularly deferential to the agency’s determination. Sara Lee Corp. v. Am.

                                                  9
Bakers Ass’n Ret. Plan, 512 F. Supp. 2d 32, 37 (D.D.C. 2007) (quoting Bldg. & Constr. Trades

Dep’t, AFL-CIO v. Brock, 838 F.2d 1258, 1266 (D.C. Cir. 1988)). 4

                                         III. ANALYSIS

               APSCU contends that the Amended Preamble “largely parroted rationales already

considered and rejected by the D.C. Circuit, garnished (at times) by additional rhetorical

flourishes, unsupported assertions, and isolated anecdotes.” APSCU Mot. for Summ. J. [Dkt. 14]

at 2. The Department counters that it “more than satisfied its obligations on remand,”

particularly considering the deferential standard of review explicated by the D.C. Circuit. Def.

Mot. for Summ. J. [Dkt. 18-1] at 2. APSCU correctly asserts that the Department has failed to

explain and substantiate its wholesale ban on graduation-based compensation. In addition, the

Department has not furnished an adequate response to commenters’ concerns about the impact of

its regulations on minority recruitment. Therefore, the Court will grant APSCU’s Motion for

Summary Judgment and deny the Department’s Motion for Summary Judgment.

    A. Graduation-Based Compensation

               First, APSCU argues that the Department has restated the same unsubstantiated

beliefs and anecdotes that the D.C. Circuit found insufficient as a matter of law. Second,

APSCU contends that the Department’s new explanations must be rejected because they are

“derivative of previously rejected rationales,” “the Department does not substantiate its ‘new’

rationales with citations to evidence in the record,” and “the ‘new’ justifications are unreasoned

and lack any discernible connection to the HEA’s goal of preventing the recruitment and

enrollment of unqualified students.” APSCU Mot. for Summ. J. at 14. For its part, the

4
 This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Venue is proper in this
district because the Department of Education is located in Washington, D.C., and a substantial
part of the events or omissions giving rise to APSCU’s claims occurred in the District of
Columbia. See 28 U.S.C. § 1391(b)(1)–(2).
                                                10
Department describes its task on remand as “a simple one,” because the Circuit merely

demanded a better explanation of its decision to eliminate the safe harbor based on graduation

rates in the context of a “fundamentally deferential” standard of review. See Def. Mot. for

Summ. J. at 8 (citing APSCU, 681 F.3d at 441, 449). The Department claims it has fully

satisfied the Circuit’s instructions and requests deference as to its reasons. Id.

               When it rejected the initial justifications for the graduation-based compensation

ban, the D.C. Circuit noted the apparent inconsistency between Title IV’s focus on “enabl[ing]

more students to attend and graduate from postsecondary institutions,” and the Department’s

regulatory prohibition on graduation-based compensation, which had “seem[ed] perfectly in

keeping with that goal.” APSCU, 681 F.3d at 448. Given that tension, the D.C. Circuit ordered

the Department to provide “some better explanation” and to “point[] to [evidence] in the record

supporting [its] assertions.” Id. Put differently, the Circuit required the Department to provide a

more forceful explanation to overcome the apparent inconsistency between Title IV’s emphasis

on graduation and the elimination of a safe harbor that seemed to incentivize program

completion.

               In the Amended Preamble, the Department summarizes its reasoning: “[B]ecause

a student cannot successfully complete an educational program without first enrolling in the

program, the compensation for securing program completion requires the student’s enrollment as

a necessary preliminary step.” 78 Fed. Reg. 17,599. Since enrollment is a necessary precursor

to completion, the Department insists that the HEA’s prohibition on enrollment-based

compensation should encompass graduation-based compensation. In briefing, the Department’s

lawyers contend for the first time that institutions have used graduation rates as a proxy for

recruitment numbers. See Def. Mot. for Summ. J. at 9 (citing APSCU, 681 F.3d at 448).

                                                 11
               But this explanation falls short of satisfying the D.C. Circuit’s order. The “proxy”

argument is advanced by the Department’s lawyers on summary judgment (in response to an

invitation from the Circuit, see APSCU, 681 F.3d at 448), but is not reflected in the Amended

Preamble. Moreover, if graduation rates could be used as a proxy for recruitment numbers,

graduation rates would need to serve as a nearly identical substitute for enrollment figures. See

Webster’s Third New Int’l Dictionary Unabridged 1828 (2002) (defining a “proxy” as

“something serving to replace another thing or substance”). Nothing in the administrative record

suggests the Department performed such an analysis, even after remand. What the Department

stated in the Amended Preamble is the common-sense and irrefutable proposition that

“compensation for securing program completion requires the student’s enrollment as a necessary

preliminary step.” 78 Fed. Reg. 17,599. It cannot be gainsaid that enrolling in a postsecondary

program—of any kind—precedes completion; in other words, one cannot end what one has not

begun.

               If accepted, this rationale would allow the Department to ban all incentive-based

compensation in higher education, as enrollment is always a necessary predicate to any

assessment of program success or student achievement. Congress specified that postsecondary

institutions are prohibited from providing commissions, bonuses, or other incentive payments

based “directly or indirectly on success in securing enrollments . . . .” 20 U.S.C. § 1094(a)(20)

(emphasis added). Had Congress intended to proscribe all incentive-based compensation, it

would have expressly done so by enacting a general ban on incentive payments, not limited to

enrollments. See Heckler v. Chaney, 470 U.S. 821, 829 (1985) (noting “the common-sense

principle of statutory construction that sections of a statute generally should be read ‘to give

effect, if possible, to every clause’” (quoting United States v. Menasche, 348 U.S. 528, 538–39

                                                 12
(1955))). The fact that Congress chose to ban only enrollment-based incentives indicates that

any regulatory prohibitions must be reasonably tied to enrollment, without permeating the entire

postsecondary education process.

               The Department’s reference to short-term programs only highlights the analytical

deficiencies in its Amended Preamble. The Department does not point to evidence substantiating

the prevalence of short-term programs as replacements for full-length education. It does state

that “[c]oncern over recruiters guiding students to short-term programs was not as prominent

when the safe harbor was adopted in 2002 because the number of such programs was not as

widespread then, having grown dramatically in more recent years.” 78 Fed. Reg. 17,599.

Assuming this statement is based on the Department’s expertise and entitled to deference, it fails

to explain why the growth of short-term programs justifies a complete ban on graduation-based

compensation for programs of all lengths. If the Department has evidence of particular abuses

with short-term programs, it could readily address those concerns by linking graduation-based

compensation to program length. But it cannot offer those concerns as a basis for eliminating all

graduation-based compensation. As the D.C. Circuit pointed out, the goal of the HEA is

successful graduation. See APSCU, 681 F.3d at 448 (“Congress created the Title IV programs to

enable more students to attend and graduate from postsecondary institutions.”).

               The Department also posits that graduation-based compensation would

incentivize recruiters to “steer students to the shortest possible programs regardless of whether

the programs are appropriate for the students, or to an even smaller number of program options

where the recruiter believes completion is most likely to be obtained.” 78 Fed. Reg. 17,599. But

again, the Department does not identify factual grounds in the record for its concerns. The Court

of Appeals ordered the Department to provide record citations for such assertions. See APSCU,

                                                13
681 F.3d at 448 (remanding to the agency because “the Department points to nothing in the

record supporting [its] assertions”). In large measure, the Department has failed to do so.

               The Department also cites the potential for institutional abuse without a total ban

on graduation-based compensation. The Department believes that “retaining [the] safe harbor

could contribute to lowered admissions standards, misrepresented program offerings, lowered

academic progress standards, altered attendance records, and a lack of meaningful emphasis on

academic performance and program quality.” 78 Fed. Reg. 17,599. The Department also

believes that “if the safe harbor were retained . . . [recruiters] would likely need to enroll even

more marginal students, and make even greater unfounded claims about a program . . . .” Id.

However, other provisions of the HEA expressly proscribe misrepresentations in the for-profit

college industry. See 20 U.S.C. § 1094(c)(3)(A) (“Upon determination . . . that an eligible

institution has engaged in substantial misrepresentation of the nature of its educational program,

its financial charges, or the employability of its graduates, the Secretary may suspend or

terminate the eligibility status for any or all programs . . . .”). The Department’s task on remand

was to support its contention that graduation-based compensation was tantamount to enrollment-

based compensation. Thus, any reference to concerns addressed in other statutory provisions is

inapposite.

               Finally, the Department offers an example in which a postsecondary institution

“counted a student who studied culinary arts and was working in an entry-level position in the

fast food industry as being employed in his field of study.” 78 Fed. Reg. 17,599. This lone

example was included in the initial preamble, causing the D.C. Circuit to remark that “isolated

examples of students who graduated from schools but could not find commensurate work . . .

[were] insufficient.” APSCU, 681 F.3d at 448. So, too, here.

                                                  14
               The Court appreciates the deference due to the Department, but the D.C. Circuit

instructed the Department to provide record evidence in support of its graduation-based

compensation ban. Because the Department has failed to do so, the Court will remand this

aspect of the Compensation Regulations. See Heartland Reg’l Med. Ctr. v. Sebelius, 566 F.3d
193, 198 (D.C. Cir. 2009) (“When an agency may be able readily to cure a defect in its

explanation of a decision, [that factor] counsels remand without vacatur.” (citing Allied-Signal,

Inc. v. U.S. Nuclear Regulatory Comm’n, 988 F.2d 146, 150–51 (D.C. Cir. 1993)).

   B. Response to Diversity Concerns

               The D.C. Circuit also ordered the Department to address concerns expressed

during the initial rulemaking concerning the impact of the Compensation Regulations on

institutional efforts to assemble a diverse student body. APSCU challenges the sufficiency of the

Department’s responses on remand, arguing that it has merely repeated rationales that the D.C.

Circuit already has rejected. The Court agrees.

               The Circuit noted that “an agency’s obligation to address specific comments is not

demanding,” and concluded that the Department’s initial rulemaking “fell just short.” APSCU,
681 F.3d at 449. The Court of Appeals remanded the Compensation Regulations to cure the

agency’s complete failure to address two commenters’ concerns about the impact of the ban on

recruitment incentives for minority enrollment. Noting that it should be “a simple matter” to

address these concerns on remand, id., the Circuit specifically ordered the Department to respond

to the comments that the Compensation Regulations “could have an adverse effect on minority

enrollment,” id. at 448 (emphasis added).

               The Amended Preamble fails to do so. On remand, the Department clarified that

“[t]he prohibition [on enrollment-based compensation] . . . includes a prohibition on paying

                                                  15
incentive compensation for efforts to promote diversity at an institution.” 78 Fed. Reg. at

17,600. However, the Department did not address comments that the enrollment-based

compensation ban “could have an adverse effect on minority enrollment.” See APSCU, 681 F.3d

at 448 (emphasis added). The Amended Preamble merely demonstrates that the Department has

statutory authority to proscribe enrollment-based compensation. The Department included the

same reference in its first preamble, which the D.C. Circuit rejected as nonresponsive on appeal.

See APSCU, 681 F.3d at 449. The Department’s reliance on the same assertion is similarly

nonresponsive here.

               In addition, the Amended Preamble states that the ban on enrollment-based

compensation is “designed . . . to keep students of all races and backgrounds from being urged or

cajoled into enrolling in a program that will not best meet their needs. Minority and low income

students are often the targeted audience of recruitment abuses, and [the] regulatory changes are

intended to end that abuse.” 78 Fed. Reg. 17,600. The agency was directed on remand to

address whether “the new regulations might adversely affect diversity outreach,” APSCU, 681
F.3d at 449, and the Amended Preamble continues to avoid that question. The Circuit

specifically ordered the Department to address the potential effect on minority recruitment, i.e.,

whether minority enrollment could decline under the new regulations. See id. (remanding, in

part, because “the Department never really answered the questions posed by” two institutional

commenters). Because the Department has yet to answer that question, the Compensation

Regulations will be remanded again.

                                       IV. CONCLUSION

               The D.C. Circuit remanded the Compensation Regulations, with the expectation

that it would be “a simple matter” for the Department to address the deficiencies in its initial

                                                 16
rulemaking. APSCU, 681 F.3d at 449. On remand, the agency has failed to explain its ban on

graduation-based compensation or respond to commenters’ concerns about the impact of the

enrollment-based compensation ban on minority recruitment. APSCU’s Motion for Summary

Judgment will be granted and the Department’s Motion for Summary Judgment will be denied.

The Compensation Regulations will be remanded to the Department of Education for further

proceedings consistent with this Opinion.

Date: October 2, 2014                                            /s/
                                                  ROSEMARY M. COLLYER
                                                  United States District Judge

                                             17