Whether the Ninth Circuit's 'formal legal prejudice' rule improperly restricts intervenors' appellate rights in agency settlements and violates principles of separation of powers

No question identified. : 2 debt incurred by students at schools that engaged in certain misconduct. See 34 C.F.R. §§ 685.206, 685.222. In this case, a class of borrowers sued in federal district court to compel the Department merely to process their lingering borrowerdefense applications under those regulations . But after secret negotiations with the plaintiffs , the Department executed a sweeping settlement that dispensed with adjudications altogether, canceled billions in loans for hundreds of thousands of borrowers , and rewrote the Department’s regulations without complying with the Administrative Procedure Act . T he Department also used the settlement to “determine[] ” that 150 schools attended by members of the plaintiff class had engaged in “substantial misconduct .” Ex. A at 14. The Department cited no evidence, provided no notice to the schools prior to the “determin[ation], ” and afforded the schools no process through which they could defend themselves . 3. Because the settlement specifically named the schools, inflict ed grave reputational harm on them, and expose d them to serious financial and programmatic consequences , four schools sought to intervene to object to final approval of the settlement. The district court permitted those schools, which included Everglades College, to intervene under Rule 24(b) and lodge their objections. Id. at 15 . Everglade s objected that the case was already moot and that the settlement violated due process, the APA, the HEA, and Rule 23 . The district court overruled those objections. Everglades appealed. A fractured Ninth Circuit panel held that although Everglades had injury sufficient to establish constitutional standing, it lacked “prudential standing” to appeal. Id. at 15-17. The majority concluded that the harms 3 inflicted upon Everglades did not amount to “formal legal prejudice.” See i d. at 2427. 4. Judge Collins dissented, explain ing that the Ninth Circuit’s formal -legal prejudice rule —which appears nowhere in the F ederal Rules of Civil Procedure — conflicts with the permissive -intervention standard in Rule 24(b) , and that, at any rate, Everglades ’s Article III injuries clear the legalprejudice bar. See i d. at 3241. Having determined that intervention was proper, Judge Collins did not opine on Applicant’s additional procedural argument that the formal -legal -prejudice rule has no application in the context of agency settlements. See, e.g., Applicant’s Pet. f or Reh’g En Banc , Doc. 94-1 at 10-11, Sweet v. Everglades Coll., Inc. , No. 23 -15049 (9th Cir.). Rather, Judge Collins turned to the merits and concluded that the district court erred in approving the massive settlement because the Department has neither the authority to unilaterally cancel student loans en masse nor the authority to amend its regulatory framework through a settlement . See Ex. A at 4145. 5. The Ninth Circuit’s “formal legal prejudice” rule lacks a solid foundation , conflicts with Rule 24 , and derogates the Judiciary’s constitutional responsibility to adjudicate Cases and Controversies . The forthcoming petition for certiorari will ask this Court to review that important issue, which presents fundamental questions regarding separation of powers and class settlements . As a multi -state coalition outline d below, this case is one of the worst examples of “the executive branc h … collusively settl[i ng] cases to make policy without having to satisfy constitutionally and congressionally imposed strictures.” Br. of Amici Curiae Ohio et al. , Doc. 24 at 2, Sweet 4 v. Everglades Coll., Inc. , No. 23 -15049 (9th Cir.). That sue-and-settle tactic short circuits both the ordinary political process and the APA by allowing federal agencies and ideologically aligned plaintiffs to negotiate settlements that dictate long -term agency policy, usually without opposition or public input. Yet under the Ninth Circuit’s rule, parties directly named and affected by one of these collusive settlements