USA Group Loan Services, Inc. v. Riley
United States Court of Appeals for the Seventh Circuit
82 F.3d 708 (7th Cir. 1996)
After Congress authorized the Secretary of Education to regulate student loan servicers, the Secretary submitted draft regulations to negotiated rulemaking as required by statute, and a Department official promised servicers the Department would abide by any consensus reached. During negotiations the Secretary proposed capping servicers' joint-and-several liability at the fees they received, but servicers instead pushed for no liability at all; the Secretary then dropped the cap proposal entirely when the rule went to notice-and-comment. Several loan servicers (plaintiffs) sued to invalidate the resulting regulations, arguing the Secretary negotiated in bad faith by abandoning the promised consensus process.
Whether a federal agency's failure to abide by a consensus reached during negotiated rulemaking invalidates a rule that the agency promulgates as a result of the negotiated rulemaking.