“Third Party Existence” Doctrine Should Not Be Used to Block Lawsuits Challenging Biden’s Student Loan Forgiveness Plan

In a blog post based on points he made in our recent debate at his school, Cornell law professor Michael Dorf argues that plaintiffs in Supreme Court cases challenging the legality of President Biden’s massive student loan forgiveness plan should be dismissed, standing, based on the rules which do not favor “third parties”. While his argument is clever, it overlooks the key point that limitations on third-party standing apply only to claims based on the constitutional rights of individuals, not those related to structural limits on government power. In addition, if the Court were to accept his reasoning, it would set a dangerous precedent that would block most legal challenges to illegal government spending.

The ongoing problems have long loomed as the biggest obstacle to challenging Biden’s loan forgiveness plan in court. From a meritorious point of view, the management’s position is very weak. Under current Supreme Court precedent, plaintiffs must meet three conditions in order to file a lawsuit in federal court: They must 1) suffer an “actual injury,” 2) the injury in question must be caused by the allegedly unlawful conduct they are challenging, and 3) the court’s decision should be able to correct the injury.

The “actual injury” requirement has been a major stumbling block for opponents of the loan forgiveness plan. The plan’s most obvious victims are taxpayers, who will foot the bill for this massive giveaway (estimated at $400 billion or more). But longstanding Supreme Court precedent rejects taxpayer status, except in a few narrow situations that are not relevant here. But in Biden v. Nebraskacase brought by six Republican-controlled state governments, the state of Missouri overcame this hurdle because it has a state agency— Missouri Higher Education Lending Agency (Model) – which services student loans, including some that will at least be forgiven under the Biden plan. Biden’s loan forgiveness program will predictably reduce MOHELA’s income from those loans, and even a small financial loss of this kind is enough to qualify for status under Supreme Court precedent.

In previous posts (see here and here ), I have criticized the Biden administration’s argument that Missouri lacks the standing to apply on behalf of MOHELA because the latter is independent of other state agencies. Dorf, however, argues that Missouri should be “denied so-called third-party status under the general rule that parties can only bring their own claims.” Under this theory, Missouri and MOHELA are only “third parties” because the possible illegality of the student loan forgiveness plan does not impair any of their legal rights as such. It just violates the constitutional and statutory limits on executive power.

In support of this theory, Dorf relies on the dissenting opinion of Justice Clarence Thomas June Medical v. Russo (2020), where Thomas argues that the Court erred in granting abortion providers standing to challenge laws restricting abortion. The constitutional right in question belonged to pregnant women, and therefore “third” providers could not encourage it.

But, as Thomas notes, this limitation on third-party standing applies to cases where private parties “attempt” to bring an action for justification constitutional rights of individuals who are not before the court” [emphasis added]. It does not apply to cases involving structural limits on government power, such as federalism and (in this case) the separation of powers. Dorf himself notes that the Supreme Court said that in Bond v. United States (2011), where an individual charged with a federal crime was permitted to argue that the law at issue was unconstitutional because it exceeded the scope of federal authority.

The court unanimously ruled that individuals have the right to raise federalism issues because “[b]By denying any government complete authority over all matters of public life, federalism protects individual freedom from arbitrary power. When the government acts in excess of its statutory authority, that freedom is called into question.” The Court went on to point out that the same principle applies to separation of powers cases:

Recognizing aggrieved person status to oppose a violation of a constitutional principle that confers power within government is illustrated, in an analogous context, by cases in which individuals suffer discrete, justifiable harm from actions that violate separation of powers constraints. The principles of separation of powers are partly intended to protect each branch of government from attack by the others. However, the dynamics between the branches is not the only subject of interest of the Constitution. The structural principles ensured by the separation of powers also protect the individual.

Unlike individual rights claims, which—according to this theory—can only be brought by people who have suffered certain rights violations, structural claims can be brought by anyone, because structural limits on government power provide general protections for all Americans.

The case of loan forgiveness is exactly the situation the Court was referring to Connection. MOHELA – and the state of Missouri generally – suffered “discrete, justifiable injury from actions that violate separation of powers constraints.” If the plaintiffs are correct, the executive branch has usurped Congress’ spending authority and harmed MOHELI in the process. As Dorf acknowledges, that injury is precisely the kind that would normally satisfy standing claims (the “third party” limitation aside). To be sure, MOHELA and Missouri are government entities, not private citizens. But separation-of-powers rules—like other structural limits on the federal government’s powers—protect the states, too.

As Thomas recognizes in his June Medical disagreements, third-party claims sometimes qualify for legitimation even in the context of individual rights. In fact, the Court allowed exactly that June Medical himself, and also in a number of other cases, such as the well-known verdict from 1925 Pierce v. Sisterhood, where a private school was allowed to increase parental rights in a challenge to a state law requiring children to attend public schools from ages eight to sixteen. Thomas believes that all of these cases were wrongly decided. I think he is the one who is wrong here. Nonetheless, even he does not go so far as to argue that limitations on third-party status should apply to structural cases.

Dorf further argues that MOHELA and Missouri’s injury does not meet the requirements for survival because it is not a true type of injury:

But even acknowledging that there are structural safeguards to protect individuals, there is surely a limit to how far that principle extends. Bond herself had the right to object that the law that would apply to her exceeded the powers of Congress. But suppose Bond’s next-door neighbor wants to sue the government on the grounds that if Bond goes to prison, her house would be empty, creating a greater risk of crime, which would reduce the value of the neighbor’s property. There are numerous objections that can be raised to such a claim, but one objection should be that it is simply not the type of injury that counts – even if we assume that it will almost certainly occur. Why not? For the neighbor’s expected pecuniary loss, even if substantial and almost certain, has nothing to do with the alleged unconstitutionality of the statute as applied to Bond.

It’s arguable that the injury to Bond’s neighbor wouldn’t qualify in this hypothetical because it was largely caused by the intervening actions of third parties: criminals who might target the neighborhood and potential buyers who aren’t willing to pay as much for houses in the area as a result. Therefore, the neighbor could lose on the causation claim for status.

But such considerations do not apply to the MOHELA situation. Here, the illegal actions of the administration directly cause financial losses to MOHELI and the state. If Bond’s neighbor suffered a similar direct injury, she should also have standing to sue.

And, as I noted in our earlier discussion, I have the same response to Dorf’s hypothesis involving an electric chair manufacturer whose contract with the government was terminated because the president decided to commute all federal death sentences in ways that the manufacturer claims exceed the scope of presidential authority. While the manufacturer’s claims should not be dismissed on the merits (because such action is within the scope of the President’s pardon power), he is entitled to standing.

If the Court rejected Missouri’s lawsuit based on Dorf’s theory, it would set a very dangerous precedent. Until there is a general taxpayer position, almost all challenges to the legality of government spending must rely on injuries similar to those suffered by Missouri, where government expenditures cause some sort of economic loss to the state or a private party. If direct financial loss to MOHELA is not the right type of injury, it is hard to see what would be.

The net effect of such permanent rules would be to give presidents an almost blank check to raid the national treasury for their favorite projects, without fear of being stopped by lawsuits. To be sure, one or both houses of Congress could still bring a case, as the DC Circuit ruled in challenging Donald Trump’s diversion of funds to build the border wall (Trump’s power grab on the border wall has many parallels with Biden’s loan amnesty policy). But such a lawsuit is likely to occur only if the party opposing the president controls at least one house of Congress. Thus, the president could still engage in illegal spending during the “united” government.

Even if you trust Biden with that kind of power, you probably don’t have the same trust in Trump, Ron DeSantis, or whoever the next Republican president might be. If expansive restrictions on third-party standing had a strong basis in the text and original meaning of the Constitution, we might simply have to live with this danger. But, as Dorf admitted at our Cornell debate, they don’t.

Indeed, the entire doctrine of status is largely a judicial creation, and a highly dubious one at that. In my opinion, the Supreme Court should simply abolish it or at least allow identification of the taxpayer in cases involving illegal expenses. Judges probably won’t do that anytime soon. But they should at least avoid expanding the limitations of third-party status to cover suits over structural issues as well as individual rights.

I think Dorf is on firmer ground in criticizing the standing claims made by plaintiffs in the Department of Education v. Brown, the second case of loan forgiveness before the Supreme Court; I raised some doubts about it myself. But I also think that this problem will not be of great importance to the final resolution of these cases. If Missouri stands, that will be enough for a ruling to overturn the plan. If the justices deny standing in Missouri, they are unlikely to grant it in another case, where the reasoning is much weaker.

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