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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 19-13639
________________________
D.C. Docket No. 1:19-cv-01707-TCB
DONRICH YOUNG,
Plaintiff - Appellant,
versus
GRAND CANYON UNIVERSITY, INC.,
GRAND CANYON EDUCATION, INC.,
d.b.a. Grand Canyon University,
Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(November 16, 2020)
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Before WILSON, NEWSOM and ANDERSON, Circuit Judges.
NEWSOM, Circuit Judge:
This appeal involves a poorly written federal regulation. (No sense in
beating around the bush.) One section of that regulation pretty clearly prohibits a
college or university that accepts federal student-loan money from enforcing pre-
dispute arbitration agreements and class-action waivers when a student brings what
the regulation calls a “borrower defense claim.” 34 C.F.R. § 685.300(e)–(f)
(2016). The regulation goes on, though—and this is where the disagreement lies—
to define “borrower defense claim” to mean “a claim that is or could be asserted as
a borrower defense as defined in § 685.222(a)(5), including a claim other than one
based on § 685.222(c) or (d) that may be asserted under § 685.222(b) if reduced to
judgment.”
Id. § 685.300(i)(1). Boiled to its essence, the question here is whether
the phrase “including a claim other than” means to include or exclude claims
“based on § 685.222(c) or (d)”—which, respectively, refer to claims alleging
breach of contract and substantial misrepresentation.
The district court interpreted that phrase to exclude breach-of-contract and
misrepresentation claims from § 685.300(i)(1)’s definition of “borrower defense
claim.” Accordingly, the court ordered the borrower-plaintiff in this case to
arbitration in accordance with an agreement that he had signed in conjunction with
his application for admission to a for-profit university. Because we hold, to the
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contrary, that § 685.300(i)(1) defines “borrower defense claim” to include breach-
of-contract and misrepresentation claims—and thus to shield those claims from
mandatory arbitration—we will reverse.
I
A
Before diving into this case’s facts and procedural history, we’ll canvass the
governing regulatory framework. The Federal Direct Student Loan Program
permits college students to obtain loans directly from the federal government to
finance their higher educations. See 20 U.S.C. § 1087a–1087h. Schools accepting
federal student-loan money must enter into agreements with the Secretary of
Education that include provisions that “the Secretary determines are necessary to
protect the interests of the United States and to promote the purposes of [the
program].”
Id. § 1087d(a)(6); see also 34 C.F.R. § 685.300(b)(11).
As particularly relevant here, federal law directs the Secretary to “specify in
regulations which acts or omissions of an institution of higher education a
borrower may assert as a defense to repayment of a loan[.]” 20 U.S.C. § 1087e(h).
At the program’s inception, the Secretary promulgated the first iteration of the
“borrower defense rule.” See 34 C.F.R. § 685.206(c) (1995). That rule allowed a
borrower to assert, as a defense to repayment of his loan, “any act or omission of
the school attended by the student that would give rise to a cause of action against
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the school under applicable State law.”
Id. § 685.206(c)(1). The rule didn’t
require the borrower to sue the school itself; he had only to assert the defense to
the Secretary. See generally
id. If he successfully did so, the Secretary would
forgive the student-loan debt and then (in his discretion) sue the offending
institution for reimbursement of the forgiven amount.
Id. § 685.206(c)(2)–(3).
Fast-forward to 2016 when President Obama’s Department of Education
amended these regulations and codified the changes in 34 C.F.R. § 685.222 and
§ 685.300. In the newly promulgated § 685.222, the Secretary of Education
expanded the scope and types of available borrower defenses. Section
685.222(a)(5) first provides a broad, general definition of “borrower defense[s]”:
“[A] ‘borrower defense’ refers to an act or omission of the school attended by the
student that relates to the making of a Direct Loan for enrollment at the school or
the provision of educational services for which the loan was provided,” and can be
invoked either as a “defense to repayment of amounts owed [but not yet paid] to
the Secretary” or as a “right to recover amounts previously collected by the
Secretary.”
Id. § 685.222(a)(5).
Subsections (b), (c), and (d) of § 685.222 go on to specify three instances in
which borrowers have borrower defenses. (There may be others; the regulations
don’t, at least explicitly, purport to limit borrower defenses to those designated in
subsections (b), (c), and (d).) Subsection (b) provides that a borrower has a
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borrower defense if he “has obtained against the school a nondefault, favorable
contested judgment based on State or Federal law in a court or administrative
tribunal of competent jurisdiction.”
Id. § 685.222(b). Subsection (c) states that a
borrower has a borrower defense if his school “failed to perform its obligations
under the terms of a contract with the student.”
Id. § 685.222(c). And subsection
(d) provides that a borrower has a borrower defense if the school or any of its
representatives or affiliates “made a substantial misrepresentation . . . that the
borrower reasonably relied on to the borrower’s detriment when the borrower
decided to attend, or to continue attending, the school or decided to take out a
Direct Loan.”
Id. § 685.222(d).
Taking stock—the Obama-era1 34 C.F.R. § 685.222(a)(5) provides a general
definition of “borrower defense” as “refer[ring]” to “an act or omission of the
school” that the borrower can then assert (to the Secretary) as a defense to
repayment or as a basis to recover previously paid amounts. Subsections (b), (c),
and (d) go on to specify at least three instances in which a borrower “has” a
borrower defense—when he has obtained a favorable contested judgment against
the school, when the school breached a contract with the student, or when the
1
We say “Obama-era” because President Trump’s Department of Education amended the
borrower-defense regulations in 2018. Those amendments, though, apply only to loans
distributed on or after July 1, 2020, and are therefore inapplicable here. See 34 C.F.R. § 685.300
(2020); see also 84 Fed. Reg. 49788, 49788 (Sep. 23, 2019).
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school or one of its representatives or affiliates made a substantial
misrepresentation.
Id. § 685.222(b)–(d).
Next—and importantly here, for reasons we will explain—the Obama-era
§ 685.300 prohibited schools from entering into or relying on pre-dispute
arbitration agreements and class-action waivers with students “with respect to any
aspect of a borrower defense claim.”
Id. § 685.300(e)–(f) (emphasis added). A
school that had already included pre-dispute arbitration provisions or class-action
waivers in agreements with students had to notify them that the school wouldn’t
seek to enforce those terms.
Id. § 685.300(f)(3)(i)–(ii). The same regulation goes
on to define “borrower defense claim” as “a claim that is or could be asserted as a
borrower defense as defined in § 685.222(a)(5), including a claim other than one
based on § 685.222(c) [i.e., breach of contract] or (d) [i.e., substantial
misrepresentation] that may be asserted under § 685.222(b) if reduced to
judgment.”
Id. § 685.300(i)(1). This case turns, pretty much entirely, on the
meaning of § 685.300(i)(1)’s phrase “including a claim other than . . . .”
B
Now to the facts. Plaintiff Donrich Young was enrolled in a doctoral-degree
program at defendant Grand Canyon University. He took out federal loans to pay
for the program, and Grand Canyon made him sign a comprehensive arbitration
agreement as part of his admissions application. In it, Young agreed that “that any
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dispute arising from my enrollment, no matter how described, pleaded, or styled,
shall be resolved by binding arbitration” and that “[b]oth I and the School
irrevocably agree that any dispute between us shall be submitted to arbitration.”
The provision further specified that any lawsuit filed in violation of the agreement
“shall be dismissed by the court in favor of an arbitration conducted pursuant to
this Agreement.”
Young’s underlying complaint is this: Grand Canyon represents that
students can complete a doctoral degree in 60 credit-hours. Young alleges,
however, that Grand Canyon obfuscates how many hours it actually takes to
complete a doctoral program and, in fact, has designed its program so that a
student likely can’t finish in 60 hours. According to Young, Grand Canyon
requires students to take and pay for additional “research continuation courses,”
and he contends that Grand Canyon’s assertion that students can complete a
doctorate in 60 hours constitutes a material misrepresentation. Young didn’t
complete his doctoral degree because he didn’t finish his dissertation on time, and,
as a result, had to pay for three additional research-continuation courses.
During Young’s time at Grand Canyon, the Obama-era borrower-defense
regulations went into effect, and Grand Canyon notified him that it wouldn’t seek
to enforce pre-dispute arbitration agreements and class-action waivers “if [Young]
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assert[ed] a borrower defense claim, as that term is defined in 34 [C.F.R.]
§ 685.300(i)(1).”
C
Young and seven others filed a class-action complaint against Grand Canyon
in federal court. They brought claims for breach of contract, intentional
misrepresentation, violations of the Arizona Consumer Fraud Act, A.R.S. § 55-
1521 et seq. (which we’ll call the “statutory-fraud claim”), and unjust enrichment,
as well as a request for a declaratory judgment. The district court dismissed the
claims brought by all plaintiffs except Young on personal-jurisdiction grounds.
Grand Canyon then moved to compel arbitration pursuant to the agreement
that Young had signed as part of his application for admission. The district court
granted the motion to compel, holding that Young’s breach-of-contract,
misrepresentation, and statutory-fraud claims were not “borrower defense claims”
as defined in § 685.300(i)(1) and so were not subject to the regulations’ prohibition
on pre-dispute arbitration agreements. In particular, the court held that the phrase
“including a claim other than” in § 685.300(i)(1) operated to exclude breach-of-
contract claims (§ 685.222(c)) and misrepresentation claims (§ 685.222(d)).
Construing the regulation to include breach-of-contract and misrepresentation
claims, the court thought, would “render various provisions superfluous, including
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the separate definitions for ‘borrower defense’ and ‘borrower defense claim’” in §§
685.222(a)(5)–(d) and 685.300(i)(1), respectively. 2
Young now appeals. Before us, the parties don’t dispute that Young’s
claims all constitute either breach-of-contract or substantial-misrepresentation
claims within the meaning of § 685.222(c) and (d). The only issue on appeal, then,
is whether breach-of-contract and misrepresentation-based claims constitute
“borrower defense claims” as that phrase is defined in § 685.300(i)(1). If they do,
then Young doesn’t have to arbitrate because 34 C.F.R. § 685.300(f) prohibits
enforcement of pre-dispute arbitration agreements for borrower-defense claims. If
they don’t, then the district court was correct to compel arbitration.3
II
A
In full—once again—§ 685.300(i)(1) states that a “borrower defense claim”
is
a claim that is or could be asserted as a borrower defense as defined in
§ 685.222(a)(5), including a claim other than one based on
2
The district court also held that Young’s unjust-enrichment claim was subject to arbitration “for
the same reasons as the breach-of-contract claim” and that the declaratory-judgment request
failed because the court had decided to compel arbitration. The parties on appeal debate the
district court’s order only as it relates to the core breach-of-contract, misrepresentation, and
statutory-fraud claims.
3
We review de novo an order granting a motion to dismiss a complaint and compel arbitration.
Cruz v. Cingular Wireless, LLC,
648 F.3d 1205, 1210 (11th Cir. 2011).
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§ 685.222(c) or (d) that may be asserted under § 685.222(b) if reduced
to judgment[.]
There’s no debate about the subsection’s first clause, which generally defines a
“borrower defense claim” as “a claim that is or could be asserted as a borrower
defense as defined in § 685.222(a)(5)”—which, in turn, generally defines
“borrower defense” as “an act or omission of the school attended by the student
that relates to the making of a Direct Loan for enrollment at the school or the
provision of educational services for which the loan was provided.” Instead, this
appeal turns on how we interpret the second, “including” clause—“including a
claim other than one based on § 685.222(c) or (d) that may be asserted under
§ 685.222(b) if reduced to judgment.”
Grand Canyon insists that, as used in § 685.300(i)(1), “including a claim
other than” is a phrase of exclusion, such that breach-of-contract (§ 685.222(c))
and substantial-misrepresentation (§ 685.222(d)) claims are never “borrower
defense claims” within the meaning of § 685.300(i)(1). Young argues, by contrast,
that the phrase means (1) that breach-of-contract and substantial-misrepresentation
claims are “borrower defense claims” even if they are not reduced to judgment in
accordance with § 685.222(b) and (2) that non-breach-of-contract and non-
misrepresentation claims are borrower defense claims so long as they qualify under
§ 685.222(b). Without much analysis of the plain meaning of § 685.300(i)(1)’s
“including a claim other than” phrase, the district court adopted Grand Canyon’s
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reading. We disagree and hold, as relevant here, that § 685.300(i)(1) includes—
rather than excludes—breach-of-contract and substantial-misrepresentation claims.
B
1
We construe regulations “in much the same way we interpret statutes,” so
we start with the text—and, if we find it clear, we end there as well. Washington v.
Comm’r of Soc. Sec.,
906 F.3d 1353, 1362 (11th Cir. 2018). The question here is
whether Young’s breach-of-contract and misrepresentation claims constitute
“borrower defense claim[s]” within the meaning of § 685.300(i)(1). A plain-text
reading of that regulation, we think, shows that “borrower defense claims” include
both claims that “could be asserted as a borrower defense as defined in
§ 685.222(a)(5)” as well as those “based on § 685.222(c)”—i.e., breach-of-contract
claims—“or (d)”—i.e., misrepresentation claims. Let us explain.
The introductory word of the key clause—we think tellingly—is
“including.” As its name suggests, the term “including” introduces a participial
phrase of inclusion, not one of exclusion. See Include, Black’s Law Dictionary
(11th ed. 2019) (“The participle including typically indicates a partial list.”); see
also Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal
Texts 132 (2012) (“[T]he word include does not ordinarily introduce an exhaustive
list . . . .”). The phrase “including a claim other than one based on § 685.222(c) or
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(d) that may be asserted under § 685.222(b) if reduced to judgment” simply means
that subsection (c) claims (i.e., those for breach of contract) and subsection (d)
claims (i.e., those based on substantial misrepresentations) are included, as are
non-contract and non-misrepresentation claims that could be asserted as borrower
defenses under subsection (b) if reduced to judgment. While § 685.300(i)(1) isn’t
particularly elegant, it isn’t fatally ambiguous, either. We think its meaning is
clear enough. After all, if the regulation said “including claims other than those
based on 685.222(c) or (d),” no one would think that it excluded subsection (c) and
(d) claims. Why so, then, with the language here, which is functionally identical?
In support of its exclusionary reading, Grand Canyon posits the following
example: “If a person asks for ‘two scoops of ice cream, including any flavor
other than chocolate or vanilla,’ it is clear that person is excluding chocolate or
vanilla as options, not including them.” Br. of Appellee at 14. But even setting
aside that it omits any sort of broad definitional clause like § 685.300(i)(1)’s
reference to § 685.222(a)(5), Grand Canyon’s example subtly tweaks the language
in a way that alters its meaning. In particular, it substitutes the word “any” for the
word “a” before (in the example) the term “flavor.” Section 685.300(i)(1) says that
a borrower-defense claim includes “a claim”—not “any claim”—“other than one
based on” subsections (c) or (d). So, back to Grand Canyon’s example: If I ask for
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two scoops of ice cream “including a flavor other than chocolate or vanilla,” I
could very well mean that I want at least one scoop of chocolate or vanilla.
In any event, two can play the analogy game, which can just as easily (we
think more easily) undermine as support Grand Canyon’s skewed reading.
Consider the following counterexample, which tracks the regulatory language
more precisely than Grand Canyon’s: “A tort claim means a claim alleging
culpable conduct resulting in personal injury, including a claim other than one
based on negligent or reckless conduct.” Few, if any, would think that the phrase
“including a claim other than” operates to exclude claims based on negligent or
reckless conduct. Rather, this sentence plainly means that a tort claim includes
claims in addition to those based on negligent or reckless conduct—say, those
alleging intentional wrongdoing or those predicated on strict liability.
Common sense confirms what § 685.300(i)(1)’s text clearly indicates.
Grand Canyon would have us read the phrase “including a claim other than one
based on § 685.222(c) or (d) that may be asserted under § 685.222(b) if reduced to
judgment” to exclude at least two-thirds of the specified borrower defenses—and
indeed, the ones most likely to underlie claims asserted by jilted borrowers, namely
breach-of-contract and misrepresentation claims. Why would a regulation that all
acknowledge was designed to protect student-loan borrowers exclude the most
basic, heartland claims that they are likely to bring? See generally Cal. Ass’n of
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Priv. Postsecondary Sch. v. DeVos,
436 F. Supp. 3d 333, 337–41 (D.D.C. 2020)
(explaining the regulation’s aim to limit schools’ ability to enforce pre-dispute
arbitration agreements and class-action waivers); see also 81 Fed. Reg. 39330,
39331 (June 16, 2016) (similar). In short, it wouldn’t, and the regulation’s text
demonstrates that it didn’t.
2
Having interpreted § 685.300(i)(1)’s plain terms, we will briefly address
Grand Canyon’s objection that Young’s (and hence our) reading renders
“superfluous” the separate definitions of “borrower defense” in §685.222 and
“borrower defense claim” in § 685.300(i)(1). Essentially, Grand Canyon’s
criticism is that if Congress wanted to make borrower-defense claims synonymous
with borrower defenses it would have drafted § 685.300(i)(1)’s definition of
“borrower defense claim” to track § 685.222’s definition of “borrower defense”
precisely. This criticism misses the mark for at least two reasons.
First, even if there were no daylight between the operative definitions of
“borrower defense” under § 685.222 and “borrower defense claim” under
§ 685.300, that wouldn’t render either section “superfluous.” The two sections—
and their constituent definitions—address slightly different subjects and have
slightly different fields of operation. True, borrower defenses under § 685.222 end
up being the bases for borrower-defense claims under § 685.300, much like an act
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of negligence ends up being the basis for a negligence claim. But § 685.222
borrower defenses have a stand-alone role, as well—as defenses that (under the
appropriate circumstances) a borrower can assert against the Secretary of
Education to resist repayment of a student loan. Language in two separate sections
of a regulation isn’t superfluous merely because it overlaps. Here, the two
sections’ similarity—or even identity—might make one or both of them inelegant
or clunky, but it wouldn’t render either of them superfluous.
Second, and in any event, there is no superfluousness issue, because under
our reading § 685.300 is actually a wee bit broader than § 685.222, at least with
respect to subsection (b)-type claims. Under § 685.222(b), a borrower has a
borrower defense only if he has obtained a favorable judgment against the school;
then—but only then—he can tell the Secretary that he doesn’t have to repay the
loan. Under our reading of § 685.300(i)(1), a § 685.222(b) claim needn’t be
reduced to judgment in order to qualify as a borrower-defense claim. Instead, the
term “borrower defense claim” includes a claim that “may be” (i.e., could be)
asserted as borrower defenses under § 685.222(b) if it were reduced to judgment.
That is subtly, but meaningfully, different. In short, to have a borrower defense
under § 685.222(b), the borrower must obtain a contested judgment. By contrast,
to have a borrower-defense claim under § 685.300(i)(1), the borrower needn’t have
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a judgment; he need only have a claim that he could assert as a borrower defense
under §685.222(b) if that claim had been reduced to judgment.
It’s worth noting, even if only parenthetically, that Grand Canyon’s reading
of § 685.300(i)(1)—which seemingly would include (b)-type claims only if they
are “reduced to judgment”—would risk leaving some borrowers in a bizarre
infinite loop from which they couldn’t escape. In order to resist mandatory
arbitration, the borrower has to show that he has a borrower-defense claim. But
(on Grand Canyon’s reading) in order to demonstrate a borrower-defense claim—
at least on a subsection (b)-type allegation—the borrower must show that he has
successfully prosecuted the claim to judgment. But how can he obtain a favorable
judgment if he is subject to mandatory arbitration? And so on and so on and so on.
* * *
Grand Canyon urges a reading of § 685.300 that would not only (1) exclude
bread-and-butter breach-of-contract and misrepresentation claims—the claims that
complaining borrowers are most likely to bring—but also (2) include non-contract
and non-misrepresentation claims only if reduced to judgment, thereby rendering
that aspect of the borrower-defense-claim protection meaningless. The language
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doesn’t require—or even counsel—that strained reading, and we decline to adopt
it.4
III
Let’s recap. We hold that § 685.300(i)(1) defines the term “borrower
defense claim” to include—rather than exclude—breach-of-contract and
misrepresentation claims—and, accordingly, that § 685.300(f) prohibits Grand
Canyon from enforcing its pre-dispute arbitration agreement with respect to
Young’s claims here. We reverse the district court’s decision to the contrary,
4
For the first time at oral argument, Grand Canyon asserted a new argument—namely, that even
if the borrower-defense regulations apply, reading them to invalidate an otherwise enforceable
arbitration agreement would contravene the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Grand
Canyon, however, has waived this argument, which it failed to present either to the district court
or in its brief to us. See United States v. Jernigan,
341 F.3d 1273, 1283 n.8 (11th Cir. 2003)
(“[A] party seeking to raise a claim or issue on appeal must plainly and prominently so
indicate[.]”). Although an appellee may urge us to affirm on any basis supported by the record,
see Thomas v. Cooper Lighting, Inc.,
506 F.3d 1361, 1364 (11th Cir. 2007), it still abandons any
position that it “fail[s] to list or otherwise state it as an issue on appeal.” Hamilton v. Southland
Christian Sch., Inc.,
680 F.3d 1316, 1318 (11th Cir. 2012); see also Sapuppo v. Allstate
Floridian Ins. Co.,
739 F.3d 678, 681 (11th Cir. 2014) (“A party fails to adequately ‘brief’ a
claim when he does not plainly and prominently raise it, for instance by devoting a discrete
section of his argument to those claims.”) (emphasis added) (quotation omitted).
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which granted Grand Canyon’s motion to compel arbitration, and remand for
further proceedings.
REVERSED and REMANDED.
18
