On Monday, January 8, 2018, the United States Department of Justice weighed in with a Statement of Interest under 28 U.S.C. § 517 in a pending state-court action (No. 1784CV02682) brought by the Commonwealth of Massachusetts against the Pennsylvania Higher Education Assistance Agency (PHEAA). The Commonwealth alleges that PHEAA violated state and federal consumer protection laws by engaging in unfair and deceptive student loan servicing practices on loans owned or subsidized by the federal government, including with respect to popular programs such as income-driven repayment plans and so-called TEACH grants. Section 517 authorizes the Department of Justice to appear in state court “to attend to the interests of the United States.” In doing so, the Department of Justice, in its Statement, maintained that the Commonwealth’s claims are preempted because (1) PHEAA cannot comply with both the Commonwealth’s interpretation of the relevant statutes and the actual requirements of federal law, (2) the Commonwealth’s claims “stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” as expressed in the Higher Education Act; and (3) the Commonwealth’s requested relief would likely “require PHEAA to violate its contract with the Department.”
PHEAA has moved to dismiss the Commonwealth’s claims on several grounds, including that the Department of Education is a necessary party without whom the case cannot proceed. Oral argument on PHEAA’s motion is currently calendared for January 10, 2018, in Suffolk County Superior Court. Ballard Spahr LLP represents PHEAA in this matter.