1. How could the Department of Education have avoided a successful challenge to the distance education rule

2. What does the court mean when it explains that a previously unpublished rule violates the APA if “interested parties would have had to divine [the agency’s] unspoken thoughts”?

3. What are the contrasting arguments for the APA’s extensive publication, comment, and revision process? Does it prevent government regulators from responding effectively to public policy problems such as fraud by for-profit universities? Does the rule-making process protect the public?

Congress passed the Higher Education Act (HEA) to foster access to higher education and provides more than $150 billion in new federal aid to approximately 14 million post secondary students and their families. Students receiving this aid attend private for-profit institutions, public institutions, and private nonprofit institutions. The U.S. Department of Education (Department) is charged with the oversight and administration of the HEA. After several investigations into for-profit universities (such as the University of Phoenix) revealed systematic attempts to mislead and engage in fraud, the Department promulgated a set of new rules because it determined that the existing regulations were too lax. The proposed rules impacted institutions of higher education in several operational ways and were intended to deter fraud and improve accountability. After a public comment period, the Department published the final rules as originally proposed, but it also included an additional final rule with new regulatory requirements for colleges offering distance learning.

The final rules were challenged by the Association of Private Sector Colleges and Universities (APSCU), which represents for-profit institutions of higher education. APSCU alleged a violation of the APA on the basis that the Department had failed to provide adequate notice of the distance learning rule to regulated parties. The trial court agreed and ruled in favor of APSCU on the issue of the distance learning rule. The Department appealed arguing that the new distance learning rule was simply a logical outgrowth of the existing rule and that the other proposed regulations gave fair notice that the Department was considering changing the rule related to distance education programs.

The Court of Appeals for the D.C. Circuit upheld the trial court’s ruling on the distance learning regulations in favor of APSCU. The court ruled that the Department had not provided interested parties with a sufficient opportunity to comment on the proposed rule and therefore violated the APA. The court rejected the Department’s argument that the new rule was a logical outgrowth of the original rule because the new rule was a significant regulatory shift for providers of distance education programs. As such, the Department was required to publish the proposed rule and provide interested parties with an opportunity to comment. 

“[The proposed rule] and the final rule need not be identical: ‘[a]n agency’s final rule need only be a logical outgrowth of its notice.’ A final rule qualifies as a logical outgrowth ‘if interested parties should have anticipated that the change was possible, and thus reasonably should have filed their comments on the subject during the notice-and-comment period.’ By contrast, a final rule fails the logical outgrowth test and thus violates the APA’s notice requirement where ‘interested parties would have had to divine [the agency’s] unspoken thoughts, because the final rule was surprisingly distant from the proposed rule’ [quoting from CSX Transportation, Inc. v. Surface Transportation Board].

“The Department does not point to anything in its Notice of Proposed Rule making that specifically addressed distance education. Nor did the Department solicit comments about the adoption of such a rule. These failures cut against the Department’s claim that the distance education regulation is a logical outgrowth of the proposed rules. More importantly, we find the Department’s claims that parties should have anticipated the regulation [without merit].”