USA GROUP LOAN SERVICES, INC. V. RILEY
82 F.3d 708 (7th Cir. 1996)
NATURE OF THE CASE: This was a dispute over contract terms agreed to.
FACTS: The Department of Education decided not to honor its official negotiated agreement
and proposed instead a liability cap, which was rejected by the loan servicers. The
Department eventually negotiated with itself, proposed, and promulgated no immunity and no
cap on liability. Ps sought judicial review based on violations of procedure for rulemaking
and negotiating. The District Court rejected the challenge and the Court of Appeals
affirmed. Ps claims were based on the 1992 amendment to the Higher Education Act, which made
negotiated rulemaking mandatory in proceedings implementing the amendment. Ps argue that D
negotiated in bad faith. Neither the 1992 Amendment nor the Negotiated Rulemaking Act has
any remedies for such acts and the latter act strongly implies there is none. An official
during negotiations promised that D would abide by what was reached during the proceedings
and a consensus was reached that Ps should not be liable for their mistakes. When the final
deal was submitted D refused to honor the promises of its negotiator. D in fact even removed
its own initial provision capping liability at the fees received to a position of no limits
on liability at all.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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